close
Friday April 19, 2024

Refinery seeks settlement deal with govt over Rs47.5bn unpaid petroleum levy

By Tanveer Malik
February 22, 2024

KARACHI: The Finance Division has asked refiner Cnergyico Pk Limited (CPL) to provide bank guarantees to settle an outstanding amount of Rs47.5 billion in petroleum levy (PL) on petroleum products, an official document showed on Wednesday.

A representational image shows Total Energies employees walking in the Donges oil refinery in Donges, on September 8, 2023. — AFP
A representational image shows Total Energies employees walking in the Donges oil refinery in Donges, on September 8, 2023. — AFP

The document, seen by The News, said CPL had been defaulting on paying the PL since 2019. The amount accumulated over the last four and a half financial years as CPL failed to deposit it in the national exchequer.

Cnergyico spokesman declined to comment when contacted for the company's version. The document said the government had tried to recover the amount from CPL, but the refinery had challenged the attempts in court.

According to the latest move, Petroleum Division (PD) has prepared a summary, recommending the approval of a Deed of Settlement (DOS) proposed by CPL to clear the dues, the document said.

The CPL offered to pay 225.2 million rupees on approval of the DOS and 790 million rupees per month in 60 installments over five years, according to the document. CPL also gave postdated cheques as a guarantee.

CPL came up with the DOS to avail itself of the incentives under Brownfield Refinery Policy as it envisages that any refinery defaulting on any government dues/PL on petroleum products will not be eligible to avail of the incentives under the policy for the upgradation of the refinery. The refinery proposed that after execution of DOS, it would execute an upgrade agreement with Oil & Gas Regulatory Authority (OGRA) and open a joint escrow account in terms of the refining policy and would deposit the incremental incentives in the account and would not withdraw them until the outstanding PL was cleared.

However, the Finance Division sought the bank guarantees from CPL when the matter was referred to it, instead of postdated cheques to ensure timely payment of the outstanding PL. The OGRA also agreed with the stance of Finance Division in the recovery of the outstanding PL from CPL, sources said. Finance Division also sought a cut in the payment duration period from five to three years and also asked for the inclusion of the amount of late payment surcharge in the installment plan. Sources said that after inclusion of the late payment surcharge, the outstanding amount was estimated to go up by over Rs60 billion. They added that the CPL showed its inability to amend its proposed plan because of its financial constraints.

Sources said although the Finance Division objected to the proposed plan of CPL, high ups in the Petroleum Division were in favour of the proposed DOS, submitted by CPL.

They said that Finance Division has sought the improved plan from CPL in view of its track record of defaulting on the whopping amount of Rs47.5 billion whereas the other refineries had cleared their dues.

Sources said the Finance Division sought the bank guarantees as the refinery moved the courts in the past when government departments approached to recover the amount. They said Finance Division, Federal Investigation Agency (FIA) and Ministry of Interior made these efforts in 2020, 2022 and 2023 respectively to recover the amount.