ISLAMABAD: The government has asked all six oil refining facilities in the country to provide full details of Deemed Duty (DD) collected on petroleum products since its inception two decades ago along with third party audits of its utilisation.

In a letter, the Petroleum Division has asked managing directors of six major refineries — Pak Arab Refinery Ltd, National Refinery Ltd, Pakistan Refinery Ltd, Byco, Attock Refinery Ltd and Enar Petroleum Refining Facility — to provide within two days the “yearly break up of DD collected by each refinery and its utilisation since its inception”.

The companies have also been asked to submit audit reports of DD conducted by third party or government auditors from its inception. The managements of all refineries are required to furnish the collection record and audit reports electronically within two days for onward submission to the Cabinet Committee on Energy (CCoE).

The letter said orders had been issued under a decision of the Cabinet Committee on Transport & Logistics (CCoTL) led by Minister for Maritime Affairs Ali Zaidi in its meeting last week.

Refineries asked to share yearly breakup and its utilisation

“The CCoTL directed Petroleum Division to place the matter of DD before the CCoE in its next meeting with yearly breakup of duty collected by each refinery and its utilisation since its inception.

The CCoTL also unanimously recommended that the Petroleum Division to carry out an audit of the Deemed Duty collected by petroleum refineries for their upgradation”, noted the minutes of the meeting.

CCoTL, led by the maritime affair minister, comprised Minister for Railways Azam Swati, Minister for Aviation Ghulam Sarwar Khan and Minister for Communications Murad Saeed.

The CCoTL was constituted by Prime Minister Imran Khan in April this year to look into the matter of uncompetitive transport and logistics costs in the country when compared to other countries in a holistic manner and suggest cost cutting measures wherever necessary.

As part of deregulation of the petroleum sector, the Musharraf government had allowed in 2002 about 10 per cent DD on local production of diesel and petrol and 6pc on other products to ensure price parity with imported products that carried 10pc customs duty, replacing the previous arrangement of guaranteed 10pc return on refining.

The DD was linked with the commitment that part of the funds so collected would be utilised by refineries to upgrade their facilities.

The DD on all petroleum products was abolished in 2007-08 except for diesel on which it was reduced to 7.5pc that remains in place even at present.

A judicial commission had concluded in 2009 that refineries had collected more than Rs80 billion through DD but not spent on improving infrastructure and sought doing away with the duty altogether.

Various sections of the government and parliament had been raising questions over the utilisation of such funds.

A petroleum minister in the PPP government had said in 2008-9 that the refineries had suffered losses due to petroleum pricing and the funds collected through DD had been set off against their losses.

The refineries have been arguing that they had together invested over Rs250bn over the past 15 years for upgradation of their installation including on isomerisation and hydro desulphration plants, leading to substantial reduction in sulphur content and improved product quality.

The matter of DD had also been on the agenda of the senate standing committee on petroleum for quite some time but could not be taken up for detailed discussions despite repeated requests by PPP Senator Rukhsana Zuberi.

Likewise, the CCoE had also raised the issue in its recent meetings on petroleum refining policy.

The Petroleum Division had a few days ago told the CCoE that refineries had invested over Rs200bn on various projects against Rs210bn collected through DD.

Published in Dawn, September 7th, 2021