ISLAMABAD, Feb 13: A move to discontinue an anomalous charge allowed to oil refineries on account of deemed duties has faced stiff resistance from quarters within the government which want the action delayed till a new government is formed after the election.

Sources told Dawn that the ministry of petroleum and natural resources had submitted to the federal government a few months back a plan seeking reduction in deemed duty on diesel and jet fuel from 10 per cent to 7.5 per cent but it was turned down by the finance ministry on the request of ‘powerful lobbies’.

The sources said that the petroleum ministry and the refining industry had agreed to reduction proposal but the agreement remained unimplemented.

Interestingly, officials in the petroleum ministry claimed the deemed duty on kerosene and light diesel had been abolished, but people in the refining industry said the two products still carried five per cent deemed duty which was being charged by the refineries.

A spokesman for the petroleum ministry on Wednesday said that during 2007, five per cent advalorum customs duty/deemed duty on SKO (kerosene) and LDO (light diesel) was abolished along with one per cent surcharge on SKO, LDO and JP-4/JP-8.

The spokesman said the government had also rationalised the oil pricing structure for refineries and OMCs by making necessary modifications in the pricing formula and the profitability of refineries and OMCs had declined by 20 per cent.

The spokesman confirmed that the refineries had not been able so far to attain European standards but said they were committed to utilising their special reserve funds for such projects.

He said the refineries were active in finalisation of their plans to improve their standards.

An examination of the profitability of four refineries, however, reveals a different situation.

The profits of the National Refinery Limited increased from Rs23 million in 2001 reached Rs1.2 billion in 2004, Rs2.458 billion in 2005, Rs3.7 billion in 2006 and Rs4.3 billion in 2007. As such, the profitability increased by more than 180 times in just six years.

Likewise, Pakistan Refinery’s profits increased from Rs76 million in 2000-01 to Rs610 million in 2002, Rs824 million in 2003, Rs1.4 billion in 2005, Rs2.1 billion in 2006 and Rs2.45 billion in 2007-- the total profitability increasing by 31 times in six years.

The profitability of Attock Refinery that stood at Rs29 million in 2000-01, increased to Rs727 million in 2001-02, Rs1.28 billion in 2004-05 and Rs1.7 billion in 2006-07—an increase by 58 times in six years.

Similarly, the profit of Pak-Arab Refinery Limited stood at Rs1.3 billion in 2000-01, increased to Rs2.36 billion in 2001-02, Rs8.9 billion in 2004-05, followed by Rs9.6 billion and Rs10.6 billion in 2007. This meant that Parco’s profit increased by 726 per cent in six years.

The sources said a powerful group within the government was persuading the caretaker administration not to revise the pricing mechanism or reduce deemed duties because it has declined to increase petroleum products despite a substantial increase in international oil prices.