Petroleum ministry signs oil refining policy; ECC nod pending

KARACHI: Prime Minister Shehbaz Sharif, who also holds the portfolio of Federal Minister Petroleum has signed the Pakistan Oil Refining Policy, The News learnt on Wednesday.

Sources revealed that the policy has been sent to different ministries and relevant government departments to seek their comments to fine tune it before it is presented to the Economic Coordination Committee (ECC) for approval.

Sources said that the signing of the policy was another step forward for its final approval to attract new investment in the refining sector, most likely from Saudi Arabia.

According to the draft of the oil refining policy, all existing refineries are encouraged to upgrade/modernise/expand (upgrade) to produce environment friendly fuels as per Euro-V specifications and to maximise production of motor gasoline and diesel by minimising furnace oil (FO).

The selection of equipment, technology, or process would be on project-to-project basis by the concerned refineries to ensure that the final finished products meet the notified Euro-V specification, while minimising FO. This upgrade could include addition or integration of petrochemical production, whether individually or jointly by the existing refineries.

The fiscal regime of the policy explained that there would be a custom duty of at-least 10 percent for six years on motor gasoline and diesel of all grades as well as imports of any other white product (finished products) used for fuel for any kind of motor or engine, effective from January 1, 2023 to December 31, 2028. To give protection to the local refineries against the said products, they would be allowed to charge the prevalent custom duty in the prices of their products.

Also, exemption has been granted from levy of customs duties/levies, surcharges, withholding taxes, general sales tax, any other ad valorem tax or any other levies/duties on import of any equipment to be installed, or material to be used in the refinery without any precondition for certification by Engineering Development Board. Federal Government shall facilitate for similar exemption of provincial and local taxes.

The objectives of this policy are to provide an enabling environment for long-term sustainability of the existing refineries and attract foreign investment in new refinery projects. This should help achieve energy security through gradual increase in self-reliance in petroleum refining capacity of the country and reduce dependence on imports of refined products by incentivising investment in upgradation and modernisation of existing refineries. It would also provide a framework of fiscal and regulatory regime, as well as future visibility of policy structure to allow for investment in new deep conversion refineries, petrochemical and oil import terminals

The policy also provides an enabling environment for attracting huge investments in a highly capital intensive industry and enforce production and marketing of high quality and environmentally friendly fuels to end consumers at competitive prices.