SIFC orders another extension for refineries

ISLAMABAD: Amid refineries’ outcry, the Special Investment Facilitation Council (SIFC) has decided to give another deadline extension for signing agreements involving around $6 billion investment in the refining sector and launch a crackdown against the smuggling of petroleum products.
The decision was taken at a meeting of the SIFC’s Apex Committee presided over by chairman Dr Jehanzeb Khan, also the prime minister’s special assistant. The meeting also directed the Petroleum Division “to resolve the sales tax issue by Nov 12”. It also directed the Oil & Gas Regulatory Authority (Ogra) “to ensure and certify that priority be given to upliftment of products from domestic refineries and in case of deficit, state-run Pakistan State Oil (PSO) would have preference for imports.
The meeting had been called on the protests of domestic refineries that Ogra had been allowing import permission without ensuring the lifting of local products from refineries, causing huge stockpiles of petroleum products, reducing their capacity utilisation and foreign exchange loss. The refineries have also not signed implementation agreements with Ogra to upgrade and expand their infrastructure because of the regulator’s lack of preparedness and sales tax exemptions on petroleum products as part of budget 2024-25.
The SIFC meeting also decided that the Petroleum Division, Ogra and provincial governments, with support from the oil industry, should take effective measures against petroleum product smuggling and ensure product quality.
The meeting also directed the Ogra chairman to ensure and certify that priority will be given to the upliftment of local refineries’ production. In case of the import of deficit products, priority will be given to PSO, followed by other OMCs.
Given the deadline for the signing of upgradation agreements already expired on Oct 22, the meeting also directed the petroleum division to move the summary for an extension for the minimum possible time as the delay in implementation of the Brownfield Refineries Policy had already caused the exchequer billions of dollars loss.
The refineries have taken the stance that budget 2024-25 practically cancelled the brownfield refining policy to set up new and upgrades of existing refineries. They have been demanding the revival of the previous taxation regime, including continuing customs duty on diesel and sales tax laws on all petroleum products. The withdrawal of the existing 10pc customs duty on the import of high-speed diesel (HSD) contradicted the “Pakistan Oil Refining Policy for New/Greenfield Refineries 2023” and the “Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield 2023,” aimed at attracting foreign investment for new refineries and upgrading existing ones”, the oil industry said.
These policies allowed a 7.5pc customs duty on HSD for 25 years for greenfield projects and a 10pc duty for brownfield projects for six years.
Published in Dawn, October 24th, 2024