Cabinet Committee on Energy (CCOE) is scheduled to meet today to approved the draft of Refinery policy 2021 which is referred by Economic Coordination Committee on August 11, 2021. Approval of new policy is likely to be deferred as some cabinet members are of the view that the policy proposes 17 percent internal rate of return (IRR) will likely to be end up higher for few refineries as seen in IPPs case.
In the ECC meeting held on August 11, 2021, Petroleum Division presented the refinery policy draft for approval wherein Federal Minister for Planning and Special Initiatives Asad Umar came down heavily on top mandarins of petroleum division for putting up the policy draft in ECC for approval. Asad Umar prevailed in the meeting and resultantly Finance Minister Shaukat Tarin who heads the ECC forum directed the petroleum division officials to present the policy in the appropriate forum of CCOE.
Minister for Planning and Special Initiatives during a briefing on the proposed refinery policy from the petroleum division, raised questions on many issues particularly on the internal rate of return. Asad, sources said, raised his eyebrows on section 4 of the proposed finalized policy draft offering tariff protection in the form of 10% import duty on Motor Gasoline and Diesel of all grades and imports of any other white products used for fuel for any kind of motor or engine for 6 years effective from January 1, 2022 to December 31, 2027. This will provide more capital than the required investment of $3.5 billion for upgradation benefitting particularly two bigger refineries.
In the said meeting, it also came to be known that when for the first time of Covid-19 hit the whole world including Pakistan, the refineries received 13 percent tariff protection which was later reduced to 12 percent. In early 2021, it was further reduced to 10 percent which is continuing and the same has been included in the policy draft for next 6 years.
Federal Energy Minister Hammad Azhar is also not satisfied with the contents of the policy draft [prepared with main input by SAPM Tabish Gauhar] who also felt that only some refineries will be bigger beneficiaries once the refinery policy 2021 is approved and implemented. In the coming CCOE meeting, the Petroleum Division will have to satisfy the chair of the meeting as to why it earlier bypassed the forum of CCOE and pitched the policy in ECC meeting for approval.