ISLAMABAD: Oil refineries have collected Rs290 billion from consumers on account of deemed duty in last fifteen years, an incentive provided by the government for upgrading their plants in an effort to produce higher-grade and environment-friendly fuel.
Of this, refineries have invested Rs127 billion in upgradation of plants and efficiencies, officials of the Petroleum Division informed the Senate Standing Committee on Petroleum on Tuesday. The committee met here with Senator Mohsin Aziz in the chair here.
Collection of deemed duty is a type of support to the refineries by the government. When some senators criticised this support by the government, representatives of the refineries said, “If you deregulate the refinery sector, we would then not need the government’s support.”
A proposal regarding introduction of low-grade petrol (80-82 RON) for motorcycle commuters to give them relief in prices was also floated. The committee referred this matter to the Ministry of Energy and Petroleum Division to invite stakeholders and start work on feasibility of the proposal. If this proposal was implemented it could benefit the struggling refineries including National Refinery, Attock Refinery and Pakistan Refinery and also help the country in reducing the petroleum products’ import of around $1.5 billion/year. It will also help use unutilised capacity of oil refineries.
The committee took this decision after taking briefing from the officials. They said that 80-82 Ron Petrol will be 10-12 rupees cheaper than the 90-92 Ron petrol currently in use.
The Committee sought information on implementation status of its earlier direction that the policy of deemed duty should not be for indefinite period to protect the interests of the refineries as well as those of the consumers. The Committee was told that the deemed duty is to protect and support the industry and not to upgrade it. The ministry told the committee that draft of the new oil refinery policy will be shared with the committee after Eid and will also include a detailed briefing on this matter.
The committee also directed the authorities to further expedite efforts for curbing petroleum products’ smuggling from Iran into Pakistan, as it is hurting Pakistani economy to tune of tens of billions of rupees.
According to some estimates, smuggling of oil from Iran is causing losses of revenue between Rs55 billion to Rs60 billion a year. Managing Director of the Pakistan State Oil (PSO) said that it faced losses of Rs25 billion in last 10 months due to petroleum smuggling from Iran to Pakistan.
The Committee was told by PSO that there are no figures with the company as to how much petroleum products are being smuggled through the Pak-Iran border.
Members of the Committee noted that smuggling needs to be curbed but the ground realities of poverty and employment woes also need to be considered while it was also the opinion of some members that it is the duty of the state to protect its revenue and curb all smuggling attempts.
The Committee was told by IG FC Southern Balochistan that in 2042 thousand kilometres area, there are four major roads and there is no government owned petrol pump on these four roads and the porous terrain makes it difficult for customs and FC to check all vehicles. He said that the matter of curbing smuggling is primarily under the Customs Department and that department needs to be strengthened and FC will provide all the support needed. Up to 8 million litres of illegal oil has been apprehended since last year by FC.
The Committee chairman observed that either the argument can be floated that because of the economic underdevelopment of the Balochistan province they should close their eyes to the smuggling or should be wary of the huge revenue loss this smuggling is causing.
The Committee recommended enhancing the capacity and human resource of Custom border task force as well as Frontier Constabulary so that the menace of smuggling of petroleum products can be put to an end. At the same time the Committee noted that people belonging to low income groups who do not have any other source of income should not suffer due to this economic underdevelopment.