OGRA asks Sindh govt to waive infrastructure development cess

KARACHI: The Oil and Gas Regulatory Authority (OGRA) has asked the Sindh government to waive Infrastructure Development Cess (IDC) on import of petroleum products.

OGRA Chairman Mansoor Khan in communiqué to Sindh Chief Minister Syed Murad Ali Shah sought the waiver of IDC on import of petroleum products.

“I am writing this letter as the Chairman of the Oil and Gas Regulatory Authority (OGRA) to bring to your immediate attention an issue of vital significance affecting the national oil supply chain and consequently the people of Pakistan, including the residents of the province of Sindh,” OGRA chairman stated in the letter.

He said that IDC has been imposed by the Sindh government on the import of petroleum products. “While we fully understand and appreciate the government’s efforts to boost its revenue sources and invest in infrastructure development, the imposition of this cess has led to significant challenges for the oil industry,” the OGRA chief said.

He mentioned that the petroleum product prices (petrol and diesel) are uniform across the country and imposition of IDC on the same would distort the prices and increase the burden on the consumers across Pakistan. In addition, the oil marketing companies are being asked to deposit bank guarantees equivalent to the IDC for each cargo, thereby straining the working capital and credit limits with the banks, he pointed out.

OGRA chief noted that this situation was untenable in view of the current cost of financing (KIBOR: 23.42 percent) and has hampered the oil industry’s ability to import petrol and diesel and clear the imported molecules.

Furthermore, Muharram holidays have coincided with the 150,000 tonnes petrol imports that were ready for clearance at the ports, but would not be available to the general consumers across Pakistan due to IDC imposition. This, he said could also lead to supply gaps across Pakistan, with grave implications for the economy and the wellbeing of the people.

The OGRA chairman requested Sindh CM to reconsider the imposition of the IDC on POL products as precedent set by the Punjab Revenue Authority (PRA) and KP provincial governments, which issued exemptions of IDC for POL products recognising that petroleum prices are regulated by the government of Pakistan.

He opined that waiver of cess in Sindh would undoubtedly ease the financial pressure on the industry, thus ensuring a more stable supply chain for essential POL products.

He said that there are challenges involved in making such decisions, but such a waiver or adjustment would be in the best interest of the public, the oil industry, and the government.