No more China freebies for OMCs

The Federal Board of Revenue (FBR) is asking the government to impose an import duty of 10% on fuel imports from China. The story behind why Pakistan imports oil from China and why it is not taxed the same as oil imported from other countries is a long and interesting one. 

Especially since China itself is a net importer of fuel. The fuel imports from China are actually a relatively new phenomenon. Following the China Pakistan Free Trade Agreement II, Pakistani OMCs started importing more and more fuel from China. It made sense because they did not have to pay 10% import duties on fuel imported from there.

Approximately 2.416 billion liters of motor gasoline/ petrol was imported from China between January 1, 2020 and January 1, 2022 – exactly two years. The CPFTA II, however, is valid until December 31, 2024. The recent move to put an import duty on Chinese fuel, however, has come after fallout from these imports became apparent in January 2022. 

What is the government doing now?

As was explained in a recent story by Profit, OMCs were able to drive up their profits through the duty waiver. Soon after the story was published, the Petroleum Division had directed all the OMCs to provide evidence based data on their imports from China. “It has been observed that a number of OMCs have imported motor spirit [petrol] from China under the CPFTA,” said the Ministry in a letter to Oil Companies Advisory Council (OCAC).

The OMCs were supposed to provide complete details of their petrol imports for the last two years within 10 days of the letter. Details included the name of the cargo, port of origin where the product was loaded, quantities in liters, offloading port along with the data of decanting and the customs duty paid.