Pakistani Govt Should Impose Duty, Sale Tax on POL Products, Export to Afghanistan

The government of Pakistan should impose sales tax (ST) and duties on export of petroleum products including oil to Afghanistan.

The government of Pakistan will be able to save more than $100 million on this deal besides government should also revise its policy as it was not charging regulatory duties on the supplies to International Security Assistance Force (ISAF). Major import of allied forces was JP4, as the United States Army exclusively used JP4 oil as aviation fuel.

Despite the shortage of gas in the country, the government was reluctant to import liquefied natural gas (LNG).

Despite the high cost of LNG, their project would still save the country about $1 billion per annum in imports of oil to run power plants, a Turkish firm Global Energy International Pakistan (GEIP) said.

The sources in the Petroleum Ministry said in the next five years, the country is required to import LNG and LPG around 6,600 mmcfd and this was already planned.

The Petroleum Ministry has been actively lobbying the Council on Common Interest (CCI) for the approval of a comprehensive incentive package for LNG import terminal operators, including a five-year tax holiday. Federal Board of Revenue is also agreed to such a policy.

The industrial sector major areas using natural gas including textile and leather sectors were of the view that the country would face around 500-600 mmcfd gas shortages by January 2012.

Members of All Pakistan Textile Mills Association (APTMA), Pakistan Tanners Association (PTA) and Textile Millers Processing Association said currently around 50 percent of gas, 29 percent of oil, 11 percent of hydel power, 7.6 percent of coal and remaining nuclear energy was being used for generation.

They said the country could produce 40,000 MW from hydel sources but currently country was producing around 6,500 MW from this source due to politicised dams building delays.

Shahzad Ali Khan of APTMA, Agha Saiddain of PTA and Shakeel Ahmad of textile and cotton sector said the country would face a gas shortfall to 2.5 mmcfd in 2014-15, 3 mmcfd in 2016-17, 3.5 mmcfd in 2020-21 and it would be 5 mmcfd in 2020-22.

"Our gas reserves will deplete by the end of 2031 until the government is not serious to find new gas reserves," Ahmad maintained.

The regulatory duties are not applicable on the supplies to International Security Assistance Force (ISAF). Federal Board of Revenue (FBR) official said the major import of allied forces was JP4, as the United States Army exclusively used JP4 oil as aviation fuel.

Turkish firm Global Energy International Pakistan (GEIP) have been reluctant to begin importing gas until the government provides a sovereign guarantee for payment, a practice that is the industry standard globally, but that violates the 2011 LNG Policy.

Oil and Gas Regulatory Authority (OGRA) will not agree to meet GEIP’s demands, as it would require the entire bidding process to be scrapped and restarted.

GEIP is for involvement of Sui Southern Gas Company and Sui Northern Gas Pipelines to guarantee they will buy-pay for 150 million cubic feet per day (mmcfd) and 200 mmcfd respectively.

The diesel price in Afghanistan is quite higher than that in Pakistan, which has been encouraging smuggling of the product to the country. This was resulting into more imports, putting extra burden on foreign exchange reserves and also causing loss of billions of rupees to the national exchequer on account of subsidies.