ECC set to approve new oil pricing formula: Govt to impose duty on diesel export to Afghanistan
* $100 per barrel crude oil cap proposed for oil marketing companies
* ECC to consider banning maize export
By Sajid Chaudhry and Zafar Bhutta
Daily Times (Pakistan) / July 30, 2008
ISLAMABAD: The government is likely to impose a regulatory duty of 35 percent on the export of diesel for NATO forces in Afghanistan in the meeting of the Economic Co-ordination Committee (ECC) of the Cabinet being held today (Wednesday), sources said.
They said the duty would be imposed to discourage subsidised diesel exports and to avoid diesel shortages in the country, adding that the committee was also likely to approve a new oil pricing and margin mechanism.
As per special authorisation of Prime Minister Syed Yousuf Raza Gilani, Finance and Revenues Federal Minister Syed Naveed Qamar would chair the ECC meeting. Sourced said the ECC planned to reduce local duties and margins of the oil marketing companies (OMC) and dealers of petroleum, oil and lubricants (POL) products.
They claimed that Pakistan was suffering by the export as well as the smuggling of diesel to Afghanistan where the price of diesel was Rs 95 per litre and 15 percent of the total requirement of Pakistan was being smuggled to Afghanistan.
OMC: According to the proposal, a cap of OMCs’ margins on diesel and motor spirit at $100 per barrel of crude oil is to be imposed as against the existing practice of allowing margins on import value of the oil.
The ECC is also expected to cut the margin on diesel from Rs 1.55 per litre to Rs 1.13 per litre and from Rs 2.12 per litre to Rs 1.60 per litre on motor spirit.
Dealers’ margins are also likely to be lowered from existing capped margin of Rs 1.77 per litre on diesel and Rs 2.43 per litre on motor gasoline.
ECC may consider a proposal for reduction in Deemed Duty from existing 10 percent to 5 percent to reduce the gains of oil refineries of the country, the official added.
Maize export: The ECC is also likely to consider a proposal submitted by the Ministry of Commerce for imposing a ban on the export of maize to reduce poultry feed prices. Due to the increase in poultry feed in the country the prices of farm chicken and eggs have registered a sudden increase in the month of July.
The government has recently allowed duty-free import of maize to save locally produced wheat, which was being used as poultry feed at an estimated quantity of 1 million tonnes annually.
However, the Ministry of Food, Agriculture and Livestock (MINFAL) is set to oppose the move by the Commerce Ministry for a possible ban on maize export.
MINFAL authorities fear that a ban on maize export would severely hurt the crop’s sowing in the next season and farmers would be left with no option but to convert to sowing sunflower instead.