Karachi September 24 2021: Pakistan Refinery has renewed its operational philosophy by using lighter crudes to make the Refinery sustainable through production of better margin products. In this regard, to ensure availability of such crudes the Company continues its discussions with various crude suppliers to secure arrangements, ensuring sustainable profitability by making the production mix favorable, as per information shared by the company.
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To achieve compliance with the revised EURO V product specifications of MS and HSD, the Company is exploring two options either acquiring pre-owned refining units with deep conversion capability or the option of having technologies which give required upgrade capability with new units but with low CAPEX.
The Finance Act, 2022 provided various reliefs to the refining sector. These include reduction in rate of minimum tax on turnover from 0.75% to 0.5% and reduction in rate of Custom Duty on crude oil from 5% to 2.5%. On the other hand, the Government has imposed Sales Tax on crude oil at 17% effective July 1, 2021, which was previously zero rated, thus putting pressure on liquidity of the Company.
The Company’s cashflow cycle has provided required assurance to financial institutions in continuing their support to the Company and despite incurring loss after taxation of PKR 7.59 billion for the year ended June 30, 2020, no running finance or invoice discounting facility was reduced or withdrawn by any bank which remained at PKR 9.45 billion and PKR 7 billion respectively. These facilities depict the confidence of financial institutions on the repayment capacity of the Company and support the Company in its liquidity management. The Company intends to further increase these financing facilities to meet the growing business needs and is in active discussion with certain banks.