Minister invites stakeholders to remove hurdles in new oil refinery policy

ISLAMABAD: Minister for Finance and Revenue Shaukat Tarin on Tuesday urged all stakeholders to work jointly to overcome hurdles in the formulation and launch of new oil refining policy.

Reviewing progress on the draft of oil refining policy 2021, Tarin said energy sector is indeed very crucial to keep the cycle of economy moving with ever growing momentum.

“Oil refineries in Pakistan have been a pillar of energy security of the country and now the government wants the domestic oil refineries to upgrade themselves at par with international standards,” he said. “Modernisation, efficiency and environment friendliness should be common characteristics of all oil refineries in Pakistan. The Government of Pakistan is willing to extend all support permitted under law and policy framework to this effect.” The meeting was attended by ministers, advisers and representatives of oil refineries. The representatives of oil refineries said the oil refinery industry is very happy due to support and patronage provided by the government. The entire oil refinery sector is ready to upgrade itself to international standards and a complete framework is ready. With the approval of new oil refining policy, the journey towards international standards will start, they said.

Under discussion since July last year, the government envisages a series of incentives for refineries to improve their capacities. Five refineries have total production capacity of 417,000 barrels per day, according to the latest economic survey. The policy proposed a 20-year tax holiday and up to nine-year cascading reduction in customs duty reduction in pricing. The government also proposed 20-year income tax holiday for all new deep conversion oil refinery projects with a minimum of 100,000 barrels per day refining capacity. The projects need to be approved before this year end.

Refineries will also be allowed to market and sell their products with no restriction from the government as far as local demand is met. Further, refineries will be exempted from customs duty, withholding tax and other levies on imports of plants and other inputs needed for construction. Prior to commissioning, the imports will also be exempted from general sales tax or any other ad valorem tax.

“Construction, operations and engineering services performed in Pakistan, whether by local or foreign firms operating in Pakistan, as well as procurement of any local materials shall remain subject to all applicable local taxes, whether provincial or federal,” said the draft of the policy.

“Pakistan oil product imports have averaged 97 million barrels/year over the past 10 fiscal years, but this could fall below 50 million barrels/year before 2030 if the refinery expansions and upgrades progress as scheduled,” Platts reported market analysts and refinery operation managers.