Govt caps incentives for refinery upgrade projects

The federal government has revised incentives in the recently approved brownfield refining policy, capping the utilisation of funds to be collected from tariff protection at 22 per cent for the import of used refining equipment and 25pc for new equipment to upgrade infrastructure. The outgoing government approved the new policy earlier this month under which existing refineries will be provided benefits for the duty-free import of machinery that can help boost production of more environment-friendly Euro-5 grade fuels — a move that is expected to help cut fuel imports. According to a notification issued by the Cabinet Secretariat, the Ministry of Energy (Petroleum Division) has been directed to revise some incentives. The 22pc cap will be on funding from an escrow account — a financial account where funds are held by a third party — for refineries importing used plant, machinery and equipment (PME) for upgrading, and 25pc for those importing new PME. The policy mandates a minimum customs duty of 10pc for a six-year period on imported petrol and diesel. Any customs duty imposed over 10pc and reflected in the ex-refinery price — the price at which refineries sell fuel — will be deposited in the Inland Freight Equalisation Margin (IFEM), used to equalise the price of petroleum products across the country.