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• The News reported that oil refineries in their recommendations for the new petroleum policy have urged the federal government to provide them exemption from turnover taxes besides seeking a number of other incentives not only to allure more investment in the sector but also to resolve the crisis of energy shortage.Oil refineries have submitted a working paper to the ministry of petroleum in which they have maintained that refineries should be exempted from turnover tax as the profitability of refineries have no relationship to the huge turnover due to high volumes and prices of petroleum products. Moreover, it is not applicable as refineries are not operated on guaranteed or assumed profit margins.
• On the issue of desulphurization of high speed diesel the working paper said that a similar incentive should be provided to all those refineries which install and operate the isomerization unit earlier than the target date of June 2014. Similarly, projects such as diesel hydro desulphurization units need support and incentives as it is for environmental up gradation with no financial returns.At present, the demand of petroleum products stood at 20 million tonnes per annum against the local production of 12.93 million tonnes whereas the deficit is bridged by imports which totaled 11.61 million tonnes in 2010 to 2011.
• It has been forecasted that the petroleum product demand by year 2025 to 2026 would be 34.4 million tonnes per annum. However, mainly due to circular debt issue, the refineries are operating below their design capacity resulting in higher imports of products. Actual local refineries production during 2010 to 2011 was 9.32 million tonnes against design capacity of 12.93 million tonnes.The paper further said that the impact of exchange losses occurring on account of time lag between products prices and the date of actual payments to suppliers which normally varies between 8 to 10 weeks needs to be absorbed in the pricing formula.The government should withdraw its directive to disallow adjustment of losses against special reserves whereas issue of circular debt should be resolved at the earliest and on permanent basis as it has severe negative impact on refineries’ profitability, capacity utilization and their smooth running on continuous basis.
• The working paper also highlighted that the payment of dividend in case of ARL, NRL and PRL has been capped to 50% of paid up capital as at 1st July 2002, this should in the first phase be linked to the actual paid up capital and later removed to allow a fair return to the investors on the actual investment.The government should also immediately focus on upgrading the infrastructure facilities for the existing refineries such as upgrading roads, water, gas and electricity that the oil infrastructure related to logistics needs to be put to better and more efficient usage.The Energy Council as announced by the prime minister in energy conference 2011 should be formed for resolving energy related issues. Country security environment must be improved to ensure investors, licensors; contractors are able to work in the country whereas the safety and security of refineries installations need to be strengthened.
• Currently, there are five refineries that include Pakistan Arab Refinery Limited with a capacity of 100,000 barrel per day and 4.5 million tonnes annually, National Refinery Limited with a capacity of 62,000 barrel per day and annual production of 2.71 million tonnes, Pakistan Refinery Limited with a daily capacity of 50,000 barrels and annual of 2.3 million tonnes, Attock Refinery Limited with daily production of 42,000 barrels and 1.92 million tonnes annually and Byco Petroleum Pakistan Limited has a daily capacity of 35,000 barrels and annual production of 1.5 million tonnes.

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