Incentivising investments: Petroleum ministry seeks 20-year tax break for Byco

ECC has already granted 7.5-year tax holiday to the country’s largest refinery.


Zafar Bhutta December 25, 2012
Byco Petroleum Pakistan operates a crude oil refinery for the production and sale of petroleum products. PHOTO: FILE

ISLAMABAD:


The Ministry of Petroleum and Natural Resources will seek an extension of tax holiday up to 20 years for Byco, which has set up the country’s largest refinery, but the incentive will lead to a loss of billions of rupees to state revenues.


According to sources, the ministry is going to table two proposals before the Economic Coordination Committee (ECC) in response to demands made by the management of Byco. The proposals say Byco should either be given a 20-year tax holiday or be allowed to recover operational cost of the single-point mooring from consumers.

In April this year, the ECC has already given tax exemptions to Byco for seven and a half years, though the refinery could not start commercial production by the scheduled time – December 2011. The ECC has given a one-year extension for completion of the project by the end of 2012.

In a letter sent to the Byco managing director in April 2009, the petroleum ministry had told him that the tax holiday would be offered for establishing the 115,000 barrels per day refinery on the condition that the refinery was commissioned by the end of 2011.

120,0000

On its part, Byco argues that the government had announced a 20-year tax holiday in 2007 for refineries to be installed in the coastal area of Balochistan. The Byco project was also in the coastal area, but the tax holiday given was only for seven and a half years instead of 20 years because it was considered a ‘relocated’ project.

Byco says it will be receiving imported crude oil from tankers to be unloaded on the single point mooring being installed 15km in the sea from the coast of Balochistan. Therefore, it will not be causing any additional burden on the national exchequer.

According to the petroleum ministry, the single point mooring will be a good addition to the country’s oil shipping and logistics infrastructure as it will help ease pressure from the port infrastructure where ship tankers are forced to pay demurrage due to congestion.

According to estimates, the refinery has been set up at a cost of about $700 million, including 40% foreign investment. The single point mooring costs $90 million.

Initially, Byco Petroleum Pakistan, earlier known as Bosicor Pakistan, had set up an oil refinery with capacity of 35,000 barrels per day in Hub district of Balochistan in 2004. Recently, it has completed another refinery of 120,000 barrels per day, which is adjacent to the existing refinery in Hub.

Published in The Express Tribune, December 26th, 2012.

COMMENTS (11)

mudassar | 8 years ago | Reply

here all my friends discussing are correct 20 years of tax break on the old and used plant, which was being disposed by UK and reason of giving 20 year tax break is SPM (Single Point Mooring) system is not seven heaven it just a floating piece of structure on the sea. there will be more tries from the Government to cover the refinery operation. i some time smell CNG problems and the commissioning refinery has linked to each other.

Please GOP to give me 20 year tax break i have been giving tax in this country since 10 years of professional career. I have not taken any loan from any bank. why not give me tax break.

GOP instead of giving tax break should take measures that the fuel refined from the refinery to reach market at reasonable price.

Anserali Khan | 8 years ago | Reply

@Muhamad Nasir: So if someone invests $70 Million they should get 20 year tax holiday.The logic is faulty.With this logic all Mobile phone companies, Oil and gas Exploration companies,Banks,Insurance companies etc should get 20 year tax holiday. No tax holiday should be given; when investment was made this 20 year tax holiday was neither a condition for making investment nor did government grant it

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