ISLAMABAD: The government on Friday allowed Pak-Arab Refinery Limited to charge about 18 paisa per litre transportation cost on high speed diesel (HSD) to earn an additional annual profit of about Rs1.3 billion.

The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Ishaq Dar that also approved disbursement of Rs960 million for payment of two-month salaries to the employees of Pakistan Steel Mills against outstanding salaries of four months.

A senior government official said the Parco, a joint venture of Pakistan-Abu Dhabi governments with 60 per cent Pakistani shareholding, had been demanding the transportation cost for HSD produced at its Multan-based refinery since the government decided to deregulate HSD pricing about two years ago.

The Ogra was reluctant to allow transportation cost in the HSD price because the original deregulation decision taken in 2010 did not specifically mention HSD in the notification of allowing transportation cost to Parco on five other products —petrol, HOBC, Light Diesel Oil and aviation fuels.

The meeting was informed that Parco earned a total profit before tax of about Rs74bn in about five years and 60 per cent of the profit was paid to the government as its dividend.

The government allowed laying a pipeline from Karachi to Mehmoodkot near Multan for transportation of crude oil and was being paid its transportation cost equivalent of railway’s transportation cost.

The petroleum ministry supported the Parco and contended in its summary that transportation cost of diesel from Karachi to Multan in normal circumstances and in the case of other marketing companies through tankers was worked out at about Rs2.50 per litre and hence Parco should be given transportation cost on the pattern of other petroleum products which depending on volume would be around 15-18 paisa per litre to be charged to the consumers through product pricing.

The Ogra had opposed the suggestion saying the Parco was already being paid the transportation tariff for crude movement of which diesel and other products were then produced.

It argued that since the Parco was earning sufficient profits, it should not be benefited through transportation cost on HSD because the cost had already been paid on crude. The petroleum ministry pointed out that the refinery was getting transportation cost on all other products through the Inland Freight Equalisation Margin (IFEM) and therefore there was no justification to deny same principle on HSD.

The finance minister agreed to this argument and decided to allow the transportation cost of about 18 paisa per litre on HSD to Parco through the pricing to be recovered from consumers as he believed it was an anomaly which should be removed and more so when the government was going to be the major beneficiary.

He, however, decided that Parco would not be paid for past transportation of HSD but reimbursement of transportation cost to Parco should be allowed with effect from April 1, 2014.

An official said the ECC did not consider reviving the Pakistan Steel Mills that is bleeding Rs2.2bn per month and has suffered Rs22.7bn in 315 days of the PML-N in power.

With no accountability progress on Rs200bn loss suffered on account of unchecked corruption, incompetence and over employment for political considerations, the government has so far failed to appoint a professional board of directors and a full-time chief executive officer a post lying vacant since June 2010.

It however agreed to pay salaries to the employees for the months of December 2013 and January 2014. The impact on public exchequer for payment of two months salaries will be Rs960m.

The ECC also approved dismantling of unserviceable confiscated tempered vehicles lying with customs authorities. The body parts of these vehicles will be put up for auction after dismantling.

The meeting also decided that all confiscated tempered vehicles of the make before 1990 be deemed for dismantling while of the later vintage will be dismantled after conclusion of the committee headed by Additional Collector Customs that the vehicle is unserviceable. The chasis would made unusable.

The ECC constituted a five-member committee headed by Finance Secretary and comprsing secretaries of petroleum, industries and water and power to examine if domestic fertiliser production could be jacked up to avoid import of 370,000 tonnes of urea at the cost of foreign exchange as proposed by the industries ministry.