MUSHTAQ GHUMMAN

ISLAMABAD: Ministry of Energy (MoE) has formulated the Pakistan Oil Refining and Marketing Policy 2020, offering substantial incentives to investors to be notified after approval from the ECC and Cabinet.

The incentives in draft package would be applicable to all new ‘state of the art’ deep conversion (not second hand/relocated) oil refinery projects of minimum 100,000 bpd refining capacity to be set up anywhere in the country. Expansion/upgradation projects of existing oil refineries for conversion to Deep Conversion Refineries with the addition of 100,000 bpd or more in the existing refining capacity.

The applicability of the incentives under Incentive Package “Category A” to the expansion/upgradation shall be subject to the following conditions:

(i) to avail the duties/taxes exemption or waiver, as provided in this Category, the expansion projects of existing refineries shall be based on new state of the art (not second hand/relocated), plant, machinery equipment, other materials and spares etc; (ii) incentives shall only be applicable to the extent of the expansion project/investment and not on the existing/old units and; (iii) incentives for expansion/up-gradation projects of existing refineries are time bound and must be availed within five (5) years from the announcement of this Policy and 20 years’ income tax holiday.

New refinery projects and upgradation/expansion of existing refineries under this category shall be exempt from the application of the Companies Profits (Workers’ Participation) Act 1968 and Workers’ Welfare Fund Ordinance 1971.

* Exemption from all duties, taxes, surcharges and levies on import, by the refinery project, its contractors or any other persons, of all machinery, vehicles, plant and equipment, other materials and spares and consumables for setting up, operation, maintenance and repair of the refinery.

* Exemption from withholding tax and all other duties, taxes, surcharges, levies and impost relating to foreign contractors/subcontractors and their personnel in connection with engineering, procurement, construction, commissioning, operation, maintenance and repair of the refinery. Exemption from leviable sales tax and excise duty on supply of locally manufactured building and construction material, equipment and services for setting up of refinery. Provision of a pricing mechanism which shall be no less favorable than the prevailing mechanism.

* Facilitation in project infrastructure such as Single Point Mooring (SPM), jetties, subsea/land pipelines etc. in coordination with various concerned Ministries/Government entities. Waiver of applicable Development Surcharge on the value of exports under the EPZA Rules 1981 in case the refinery project is set up in an Export Processing Zone.

* Temporary imports by contractors/sub-contractors of all machinery, vehicles, plant and equipment, other materials and spares in connection with engineering, procurement, construction, commissioning, operation, maintenance and repair of the refinery shall be exempted from all duties, taxes, surcharges and levies on import.

In case of establishing a project in upcountry locations, the imported crude oil transportation pipelines and its storages will be an integral part of the refinery project and will also be eligible to avail all incentives.

The incentives in Package B would be applicable to all new state of the art deep conversion (not second hand/relocated) oil refinery projects of less than 100,000 bpd refining capacity to be set up anywhere in the country.

Brownfield Projects: Expansion/upgradation projects of existing oil refineries for conversion to deep conversion refineries with the addition of less than 100,000 bpd in the existing refining capacity. The applicability of the incentives under Incentive Package “Category B” to the expansion/upgradation shall be subject to following conditions:

(i) To avail the duties/taxes exemption or waiver, as provided in this Category, the expansion projects of existing refineries shall be based on new state of the art (not second hand/relocated), plant, machinery equipment, other materials and spares etc ;(ii) incentives shall only be applicable to the extent of expansion project/investment and not on the existing/old units; and (iii) incentives for expansion/upgradation projects of existing refineries are time bound and must be availed within five years from announcement of this policy.

Linkage between retail development and mandatory storage capacity shall be discontinued. Accordingly, the ban imposed by OGRA on retail development by Oil Marketing Companies (OMCs) in relation to lack of storage capacity in the regional context shall be lifted. However, OMCs shall be obligated to work out their storage development plans on regional requirement and national coverage basis.

Oil Marketing Companies and dealers will maintain an online inventory system in a phased manner in order to review and monitor stock levels at oil depots and retail outlets. OGRA will develop a suitable monitoring mechanism in consultation with the industry.

The process for deregulating the marketing companies’ margins and dealers’ commissions will continue in a gradual manner with a view to enabling them to invest in the construction of commercial POL storages, logistics and allied facilities for which OGRA will develop a suitable monitoring mechanism. Till the complete deregulation of oil marketing companies’ and dealers’ margins, the dispensation shall be reviewed on an annual basis in line with the inflation rate /CPI published by the Government of Pakistan. The revision should be effective July 1st i.e. start of each financial year without further ratification from the ECC/Cabinet.