ISLAMABAD: For more than two decades, the Pakistani government has been imposing a charge known as the “deemed duty” on petrol and diesel prices. This levy has generated billions of rupees, which have been allocated to domestic oil refineries with the goal of facilitating their technological advancement and infrastructure modernization. The policy, initially introduced in the year 2000, was designed as a temporary measure to support local refineries in upgrading their facilities and enhancing fuel production quality.
During a recent discussion on the program Khabar, host Muhammad Malick shed light on the origins and ongoing implications of this policy. He highlighted that the deemed duty was originally set for a three-year period but has since continued for over twenty years. By 2022, nearly Rs300 billion had been disbursed to refineries under this scheme, a substantial sum aimed at improving the country’s fuel refining capabilities. Despite these significant payments, questions remain about whether the funds have been effectively utilized to achieve the intended refinery upgrades.
Addressing concerns related to the deemed duty, Federal Minister for Petroleum Ali Pervaiz Malik provided further clarity on the current status of this levy. He revealed that approximately Rs7.5 per litre of petrol and diesel is presently included as deemed duty, which is directly channeled to domestic refineries. The purpose of this charge is to finance technological enhancements and modernization efforts, enabling refineries to boost production efficiency while adhering to stricter environmental and quality standards.
Minister Malik also noted that during the previous government’s tenure, the deemed duty was increased from Rs7.5 to Rs10 per litre. This adjustment was incorporated into the overall petrol price structure as part of a broader refinery upgrade policy. The funds collected through this mechanism are earmarked for deposit into an escrow account, ensuring that the money is specifically allocated for upgrading refinery infrastructure and reducing environmental pollution caused by outdated processing methods.
It is important to understand that deemed duty acts as a financial incentive designed to encourage domestic refineries to expand their production capacity and improve fuel quality. While this levy remains embedded in the fuel pricing framework, it was not identified as a contributing factor in the recent Rs55 hike in petrol prices. Instead, the deemed duty continues to serve its original purpose of supporting refinery modernization, which is crucial for Pakistan’s energy security and environmental commitments.
Looking ahead, the effectiveness of the deemed duty in achieving its goals will likely come under increased scrutiny. Stakeholders and the public alike are keen to see tangible improvements in refinery operations and fuel standards, given the substantial financial resources allocated over the years. The government’s commitment to transparency and proper utilization of these funds will be essential in maintaining confidence in this long-standing policy.
