Oil refineries continue to collect deemed duty at the rate of 7.5 percent on total sales from consumers of High Speed Diesel (HSD) since 2002 without upgrading their plants or depositing the amount collected in an escrow account as approved by the Economic Coordination Committee (ECC) of the cabinet, informed sources told this correspondent.
Since 2002, ECCs have approved the levy of deemed duty for the specific purpose of upgrading and expansion, including extension in deadline in production of Euro II grade HSD, as a condition to avail the deemed duty. The last approval was accorded on 3 April 2016 by the ECC led by Ishaq Dar for a period of 18 months which expired on 2 September 2017. Since then the collection of the levy is no longer legal, sources further revealed to Business Recorder.
"The matter of collection of deemed duty by oil refineries will be referred to FIA and Auditor General of Pakistan for further probe and will also be brought for discussion in the meeting of Senate Standing Committee on Petroleum," Mohsin Aziz, Chairman Standing Committee told Business Recorder.
According to sources, the deemed duty of Rs 8.24 per litre continues to be charged by oil refineries from consumers. A previous package, approved by the Pakistan Peoples Party (PPP) government towards the end of its tenure, included increasing deemed duty to 9 percent as an incentive to oil refineries to upgrade their plants and bound the refineries to deposit the money in an escrow account however this was not successful.
Former Member Energy Planning Commission, Shahid Sattar told Business Recorder that collecting deemed duty without the approval of the ECC is a violation of government rules and regulations. Refineries have continued to collect deemed duty from consumers since 2002, an estimated total amount of Rs 500 billion, he added.
During a senate standing committee on petroleum meeting on August 31, Director General Oil, Petroleum Division clarified that the government allowed inefficient oil refineries to collect 7.5 percent deemed duty above their profit margin and "if deemed duty is abolished, these oil refineries would be closed."