The multinational petroleum company was able to record better performance on back of higher sales and a tight control over its expenses, especially financing costs. PHOTO: FILE
Shell Pakistan Limited posted a profit of Rs59.53 million for the third quarter (April-June 2013), a major improvement over the loss of Rs1.764 billion it incurred in same period last year.
As a result, losses for the six month period from January to June 2013 fell by 96% to Rs65.8 million compared with Rs1.988 billion suffered in first half of 2012.
The multinational petroleum company was able to record better performance on back of higher sales and a tight control over its expenses, especially financing costs.
Fiscal results, which were released to the Karachi Stock Exchange, came along with a detailed statement of Shell Pakistan’s Chairman and CEO Omar Sheikh who complained about tough business conditions in the country.
“We continue to be affected by very low regulated fuel margins, an unfair turnover tax mechanism and continued financing cost of government receivables,” he said.
During first half of the year, the company received Rs1.526 billion from government under different heads but it still awaits payment of over Rs6.9 billion in sales tax refunds, petroleum development levy, subsidies and imported purchases. These receivables have been pending for one to 10 years.
Referring to the April 2013 raise in margin on petrol and diesel that oil marketing companies get in rupee terms on sale of a litre of fuel, Sheikh said “Currently, these margins are not at a level sufficient to cover steadily rising direct costs of operations and high cost of financing required for investment in stocks and business assets,” adding that these regulated margins stand lowest in the region.
Shell’s statements highlighted the continuous repercussions of turnover tax, which is eating the industry’s profit.
Published in The Express Tribune, August 23rd 2013.
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I will have to agree with Shell's management here. The government is bent upon destroying the oil and gas retailing sector. Their policy is clearly anti business. They have failed to understand the economics of an OMC business. It is a shame that multinational companies like shell and others are now seriously thinking of divesting their stake and leaving Pakistan forever. This sends a very negative message to international investors. A very low margin industry is being forced to pay a very high percentage of tax and the govt is also not in a position to pay their dues amounting to billions of rupees. It is not the circular debt but the poor and extremely pathetic economic management of the petroleum ministry, ogra and finance ministry because of whuch small and big shareholders are suffering from heavy losses. I can assure you, nobody will be willing to invest in pakistan under this kind of a pathetic business policy which gives no incentive to potential investors what so ever! Turnover tax on such a low margin and highly leveraged business should immediately be abolished! Kind Regards, Saad A. Mir