KARACHI: The Oil Companies Advisory Council (OCAC) demands restoration of import concessions available for oil & gas sector, which were withdrawn in the Finance Act 2014-15.
“We intend to take up this matter at the highest level because the withdrawal of the incentives has quite adversely impacted the expansion and up-gradation plans of the industry,” an OCAC official said.
SRO 575(I)/2006 granted duty and tax concessions on the import of machinery, equipment and spares meant for initial installation, balancing, modernization, replacement or expansion of energy sector projects.
The official said withdrawal of SRO 575 prevented the industry from availing concessionary rates of duties and taxes for custom clearance on import of plant and machinery.
“The arbitrary withdrawal of the incentive as projects were ready to commission is not fair,” OCAC noted.
About the delay in local refineries’ Diesel Hydrodesulphurization (DHDS) projects for the production of Euro II diesel, OCAC said the refineries had based their project economics on SRO 575 and its withdrawal disturbed the entire plan.
“Significant financial challenges faced by the global refining business also translated into challenges for the local refineries, adversely impacting their margins and capacity to finance such capital intensive projects. The DHDS project is primarily an environment related project and therefore does not have the required payback capacity, making the task of achieving Financial Close an uphill and onerous one,” the official said.
Project completions fell behind the target date of December, 2015 because of various factors some of which are common to all the refineries targeting to achieve Ministry of Petroleum’s directives to produce Euro II PMG and Euro II HSD.
OCAC official said the condition to obtain certification from Engineering Development Board (EDB) that the plant and machinery to be imported is not locally manufactured was another serious hurdle as EDB lacks the required resources and capacity to fulfill this certification function.
Moreover, unexpected constraints in inland transportation of plant and equipment from Karachi to upcountry such as blockage of roads due to political sit-ins, and abnormal rains during the critical construction period also delayed the completion of projects.