Talks between oil refineries and the government over the issue of replacing deemed duty with processing fee have met a deadlock as the refineries have refused to accept processing fee offered by government from $3.5 to $5 per barrel crude oil, and demanded raise in deemed duty from 7.5 to 10 percent.
Sources told Business Recorder that the government had offered processing fee of $3.5 per barrel of crude oil to National Refinery Limited (NRL) and Pakistan Refinery Limited (PRL), and $5 per barrel processing fee to Attock Oil Refinery and Bosicor Pakistan Limited (BPL).
These four oil refineries, in a joint letter addressed to Petroleum Ministry, not accepting the said processing fee rate, have demanded raise in deemed duty from 7.5 percent to 10 percent--to recover losses. They claimed that they were facing loss in line with the reduction in global oil prices.
The refineries and the government also have differences on the implementation of processing fee on different petroleum products. The government is of the view that processing fee would be given on products whose prices are regulated by the government. These products include premier motor gasoline, HOBC, light diesel oil, kerosene oil, JP-1, JP-4 and JP-8. The government determines the prices of these products on monthly basis.
But refineries want the implementation of processing fee on petroleum products that have been deregulated. These products are furnace oil, naphtha and liquefied petroleum gas (LPG). The government has turned down the demand of refineries, and now they are demanding raise in deemed duty from 7.5 percent to 10 percent, instead of replacing it with processing fee.
Oil refineries are not meeting the international standards even after receiving 7.5 percent deemed duty. Earlier, they were being given 10 percent deemed duty, which was reduced to 7.5 percent on July 31, 2008 when global oil prices stood at $147 per barrel. Refineries were receiving more than $10 per barrel through deemed duty when the global oil prices stood at $147 per barrel. But they failed to reduce sulphur content in diesel and lead in petrol to meet the set standards. No oil refinery has set up de-sulphuration plant to upgrade the petroleum products.