Bitumen price: PD for reduction of customs duty, sales tax on crude oil

ISLAMABAD: In a bid to reduce the price of bitumen used in the infrastructure projects across the country, the Petroleum Division has not only recommended the reduction of customs duty on crude oil, but also asked for a decrease in sales tax on bitumen.

The Petroleum Division also asked for a decrease in sales tax on steel sheets, which will help reduce the price of packed bitumen in drums. It also sought control in the influx of smuggled bitumen in the domestic market, which would enable consumption of domestically-produced bitumen in the local market.

The Ministry of Energy has submitted the recommendations with the prime minister as it desired to scale down the prices of bitumen across the country. The report that has been submitted with the prime minister covers the three subjects, which include the evaluation of demand-supply situation of bitumen and what percentage of it is exported, price trend in the country and reasons for increase in the bitumen price in the country for the last six months.

The report says that bitumen is extracted from crude oil and substantial increase in bitumen price is due to volatility in the crude oil and petroleum products prices in international market coupled with and other allied factors such as depreciation of Pak Rupee, demand-supply situation as well as revival of economic activities in the world after Covid-19 depression.

Its prices usually remain in between 40pc to 65pc of furnace oil price subject to demand supply situation. It says the bitumen sales margin is much more attractive, which is historically more than double of furnace oil.

The Pak Arab Refinery sold bitumen at an average price of Rs84,614 per metric ton to oil marketing companies in the last six months. Likewise, the Attock Refinery Limited (ARL) sold it at Rs69,041 per ton and National Refinery Limited Rs69,285 per ton. In Pakistan, bitumen is produced by three refineries, which include PARCO, ARL and NRL. They produce mainly a standard paving grade bitumen for road construction as well as modified bitumen for industrial usage and for buildings.

The bitumen is largely consumed (about 90pc) for infrastructure projects under the federal, provincial and city district governments and the remaining 10 percent is used by other stakeholders such as the housing sectors and township developers. The bitumen market share is about 3-4 percent of the total POL products. Due to lesser demand, refineries are forced to operate bitumen production units at less than 50pc of the designed capacities, which increase the manufacturing cost.