Pakistan government begins probe into misuse of petroleum imports from China
Jan 15, 2022
Islamabad [Pakistan], January 15 : Probe into misuse of petroleum imports from China began in Pakistan as the federal government on Friday ordered all oil marketing companies (OMCs) to provide evidence-based data on the import of petrol from China amid reports of the misuse of China-Pakistan Free Trade Agreement (CPFTA).
Under the CPFTA renegotiated in 2019, the Pakistan government had issued statutory regulatory orders on December 31, 2019, that abolished tariff on import of petrol. As such, there was no customs duty on the import of petrol from China with effect from Jan 1, 2020. Normal petroleum imports from all other sources, mostly the Middle East, attract 10 per cent customs duty while similar deemed duty is applicable on production from local refineries, according to Dawn.
Further, results in a price saving of about 10 per cent on petrol imports from China. However, this price differential is retained by the OMCs as windfall profit instead of its benefit to the exchequer or the consumers. Depending on the international petrol price published in Platt's Oilgram, the gap normally works out between Rs9-12 per litre.
Earlier, the key purpose of the free trade agreement signed on April 28, 2019, was the promotion of fair trade competition.
On the other hand, China itself is a net importer of petroleum products including petrol and transportation cost to Pakistan is relatively higher than that of the Middle East. Yet this provides a substantial cushion to the OMCs.
Earlier, last month, the local refineries had told the government that domestic production of petrol and high-speed diesel (HSD) could potentially go up by 60 per cent and 48 per cent , respectively, at a significant foreign exchange saving provided the local refineries were operated at optimum capacity.
Meanwhile, Pakistan's oil import bill, particularly of refined petroleum products, has been the largest chunk of about 83pc increase in imports in the first five months of the current fiscal year, causing unrest among the government ranks as money and share markets plummeted last month, according to Dawn.
Further, the local refineries had been agitating their operational challenges because of lower furnace oil off-take by power producers despite their extremely low storages than contractually required and large import quantities of both petrol and diesel by OMCs.
