Islamabad September 19 2023: The existing formula that requires the refineries to transfer an amount of profit above 50% of paid up share capital to a Special Reserve account for expansion/ modernization would be superseded after Refining Policy for existing refineries.
The pricing of the refineries’ petroleum products is carried out under the Import Parity Pricing Formula, as modified from time to time by the Government under which the cost of crude oil is determined on import parity basis. Product prices are fixed fortnightly, equivalent to the import parity price calculated under prescribed parameters. Among other directives, the Pricing Formula requires the refineries to transfer an amount of profit above 50% of paid-up share capital as at July 1, 2002 to a Special Reserve account for expansion/ modernization.
However, one of the refinery states that after notification of the Refining Policy for Existing Refineries, this requirement shall be superseded and will not be applicable for future periods.
The Government has approved Pakistan Refining Policy for Existing Refineries 2023 in August 2023 (the Policy). The Policy contains fiscal incentives in the form of tariff protection for existing refineries subject to strict terms and conditions including monitoring by OGRA. Under the Policy, the refineries shall be allowed 10% tariff protection applicable on Motor Gasoline and Diesel’s ex-refinery price for 6 years from the date of notification of the Policy. However, the 10% tariff protection on Motor Gasoline and 2.5% on Diesel (incremental incentive) shall be deposited by refineries in the Escrow Account maintained by OGRA for utilization of upgradation projects only. Withdrawals from the Escrow account would be subject to OGRA monitoring, compliance with project milestone etc. Refineries will be allowed to withdraw maximum of 1/4th of the Upgradation project cost from the Escrow account.
