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New tax on petroleum products under study

February 11, 2002

ISLAMABAD, Feb 10: The government may charge a new tax on petroleum products to collect Rs15 billion for increasing strategic oil storage, Dawn learnt on authority.

The collected amount would be put at the disposal of the ministry of defence and national logistics cell to construct, maintain and operate the strategic storage in view of the current border situation.

A government official told Dawn that a mechanism would be devised in consultation with oil marketing companies on the supply of products.

He said the proposal, a brain-child of Petroleum Secretary M. Abdullah Yousaf, was discussed at a recent meeting held over by Petroleum Minister Usman Aminuddin in view of additional expenditure arising out of the military buildup at borders.

The official did not agree that it was a “war tax” but said it may be a one-time levy to meet additional pressure. He said the petroleum ministry had decided to review the strategic requirement in consultation with the defence ministry to “re-determine the level of additional storage and stock requirement keeping in view the perception of threat”.

Referring to the requirement of War Book, sources said that an additional storage capacity of about 600,000 tons to 700,000 tons of high speed diesel and motor spirit was required.

An additional Rs5 billion would be required for storage facilities and Rs10 billion for maintaining additional stocks.

Meanwhile, the petroleum ministry has rejected a proposal from the oil marketing companies to support the private sector through the levy of a cess on petroleum products.

Mainly because of war perception, the government put on hold further deregulation of oil sector that would have reduced the number of fixed price oil depots from 29 to 10.

Also, the government barred oil marketing companies from closing their depots in far-flung areas for the time being and asked them to continue with the existing set-up.

In the post-Sept 11 incidents, the petroleum ministry is holding periodic meetings with the oil industry to review demand-and-supply position of petroleum products following the presidential orders to be extra-vigilant on stocks position and to augment the reserves position.

The government is reported to have enhanced its strategic oil reserves position to 30-day equivalent from 19-day since Sept 11 through some readjustment but no storage project could be taken in hand so far.

The country’s oil import bill has reduced by around 26 per cent in seven months of current fiscal year. The total oil imports amounted to $1.53 billion in July-January this year against $2.057 billion in the same period last year. Annual crude oil requirement is around 5.5 million tons at the rate of around 100,000 barrels a day.