Investigation begins into misuse of oil imports from China

ISLAMABAD: Amid reports of misuse of the China-Pakistan Free Trade Agreement (CPFTA), the government on Friday ordered all petroleum trading companies (CMOs) to provide factual data on importing oil from China.

As part of the CPFTA renegotiated in 2019, the government had issued statutory regulatory decrees on December 31, 2019, which removed customs duties on the importation of gasoline. As such, there were no tariffs on the import of gasoline from China as of January 1, 2020. Normal imports of petroleum from all other sources, primarily the Middle East, entail customs duties of 10%, while a deemed similar duty is applicable to local production. refineries.

This translates into a price saving of around 10% on gasoline imports from China. However, this price difference is retained by MOCs as a windfall profit instead of benefiting the public treasury or consumers. According to the international petrol price published in Platt’s Oilgram, the gap is normally between Rs 9 and Rs 12 per litre.

CMOs must provide two-year purchasing data under CPFTA

“It has been observed that a number of OMC have imported motor gasoline [petrol] of China under the CPFTA,” the energy ministry said in a letter to the Petroleum Companies Advisory Council (OCAC), an umbrella association of about two dozen refineries and oil companies.

He asked OCAC to ensure that CMOs provide full details of their gasoline imports over the past two years, from January 1, 2020 to January 1, 2022 within 10 days. Full details were sought on the name of the shipment, the port of origin where the product was loaded, the quantities in liters, the port of discharge as well as the date of decantation and the customs duties paid.

Interestingly, the main objective of the free trade agreement signed on April 28, 2019 was the promotion of fair trade competition.

China itself is a net importer of petroleum products whose gasoline and transportation cost to Pakistan is relatively higher than that of the Middle East. Yet it provides a substantial cushion to the CMOs. The current position under the CPFTA is valid for four years – from January 1, 2020 to December 31, 2024.

This comes despite the fact that local refineries had been mourning low capacity utilization throughout the year, and sometimes the complete closure of their refinery facilities, mainly due to increased imports of petroleum products. . Three out of five local refineries have ceased operations in the past two weeks.

Last month, local refineries told the government that domestic production of gasoline and high-speed diesel (HSD) could potentially increase by 60% and 48%, respectively, with a significant foreign exchange saving, provided the local refineries are operating at their optimum capacity.

The import bill for petroleum, particularly refined petroleum products, was the largest increase of about 83% in imports in the first five months of the current fiscal year, causing unrest among government ranks as the money and stock markets fell last month.

Local refineries had waved their operational challenges due to lower heating oil offtakes by power generators despite their extremely low storages compared to contractual requirements and large import quantities of gasoline and diesel by OMC .

Posted in Dawn, January 15, 2022

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