Govt May Approve Tariff Protection on Diesel, Petrol to Meet Demand

The Cabinet Committee on Energy (CCOE) may endorse a tariff protection of 10 percent deemed duty on diesel and 2.5 percent on petrol to help oil refineries increase production capacity and meet the country’s demand.

It had already been budgeted for, but refineries were not permitted to use the collection to upgrade their plants, reported Express Tribune.

In a meeting, the Petroleum Division informed the CCOE that petroleum products were accountable for 31 percent of Pakistan’s primary energy mix, with an annual consumption of around 23 million tons (MTPA). Locally refined products account for approximately 11 MTPA while the remaining is imported.

Pertinently, five refineries refine both domestic and imported crude oil, which is periodically upgraded to meet fuel specifications.

The government has pressed oil refineries to upgrade their plants further by producing Euro-V specification fuels and reducing furnace oil production, but this requires an investment of around $4-4.5 billion. Refineries may be required to locate funding of this scale, and also improve their balance sheets in order to obtain funding.

The refineries’ profit and loss statements from the last five years show that they need the government’s help to help finance the upgrades.

If the government does not intervene, industry players believe the sector will be forced to close. If this develops, 70,000 barrels per day of domestic crude oil production would have to be exported, while imports would wreak havoc on ports already overburdened by stranded cargo due to central bank restrictions.

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