DOCUMENTING UNTAXED SECTORS VITAL FOR REDUCING TAX BURDEN & PRICES
INTERVIEW MOHAMMAD WASI KHAN, PRESIDENT CHEMICAL MANUFACTURING BUSINESS BYCO OIL PAKISTAN LTD.
Apr 18 - 24, 2011
Mohammad Wasi Khan who carries an extensive exposure and vast experience in the oil regime has called the energy sector as one of the most sensitive contributors to the state of the economy either in upward or downward direction; it all depends on the application of the energy resources.
Commenting on the prevailing energy crisis within the country as well as the effects of abnormal hike in the international oil prices, Wasi Khan, who has an habit to speak with facts and figures, said in a firm tone that if the economic managers desire to use the energy sector as an effective contributor to economic growth should find other untaxed and untapped income generating areas for example the agriculturists, traders and service sectors for levy and taxes instead of increasing tax burden on a few identified sectors including oil or energy sector.
He cited the incident of fire eruption in Lahore's Shah Alami Market as an example of tax evasion. The people involved in fire incident submitted claims of billions of rupees for damages. After receiving the claims, the authorities asked the owner to show income tax returns and it was divulged that total tax paid by him was Rs1250 compared with his claim for damages running in billions of rupees. It is irony of the situation that one person claiming Rs1.5 billion for damages had contributed a paltry Rs1250 in a year, which tells the whole story of tax evasion in our society.
WASI KHAN PROFILE
Mohammad Wasi Khan who is a Chemical Engineer by profession started his career in National Refinery Limited Karachi in 1981 and after climbing several steps on the corporate ladder he became Deputy Managing Director. In 2005, he moved to Bosicor Pakistan Limited as President & CEO. Since the year 2009, he is President Chemical Manufacturing Business in Byco Oil Pakistan Limited.
On the point of high cost of petroleum products and abnormal increase in energy prices in general, he said that a actually tax evasion either directly or in connivance with the government functionaries does not help developing a tax culture and the genuine tax payers feel fool for themselves. The exempted areas like agriculture in fact is a heaven for tax evasion as those having income also have gone into agriculture and shift their income to agriculture or other exempted sectors. This trend would not help in any way especially when the government has to deal with a deficit budget.
In this situation, the consumers have to suffer across the board in the face of indirect taxes like GST etc. In order to handle the rising price inflation, imposition of taxes have to be balanced at par to bring down prices including petroleum products or electricity tariff if the tax is shared by every income generating sector judiciously, he remarked.
In order to bridge the gap of budget deficit, uniformity of tax is vital and if every sector of the economy without exemption contributes towards national treasury, the current revenue target, which is roughly around Rs1.2 trillion, would go into double figure effortlessly.
In order to give a restart to the stalled economic areas, it is pertinent to make energy as an affordable commodity for boosting economic activity in a number of areas quite capable to generate much more revenue for the government.
When asked to comment on the contribution of the refinery sector towards the economy of Pakistan, Wasi Khan after a pause came out with a figure that currently Pakistan's demand for petroleum products is around 20 million ton per annum while the contribution of indigenous crude through local resources is only 10 percent of the total demand. It is roughly 60,000-70,000 barrel a day, while rest of the demand is met through import of crude oil or import of refined products. The nameplate refining capacity of the sector is estimated around 12 million ton. Out of the total oil consumption, the local refineries of the country contribute some 60 per cent of the demand while remaining 40 percent of demand is met through import of the finished product. The demand of furnace oil fluctuates in accordance with the demand of power generating sector on the back of water reservoir position.
Local refineries are meeting about 60 percent of the demand of finished petroleum products. In the absence of refineries, we do not have the capacity to receive and distribute the petroleum products directly to the consumers. Hence, refineries are saving a considerable amount of foreign exchange through value addition of crude oil and thus the role of the refineries is highly significant in terms of import substitution.
The import infrastructure of the country is not capable to meet local demand of finished product. However, local refineries located in different parts of the country are providing a tremendous strategic logistic advantage to the petroleum infrastructure, saving foreign exchange and providing a basic component to the demand and supply of petroleum products in the country, he said with a sense of satisfaction.
Byco Busient Incorporated (BBI) has pioneered the change in the energy sector of Pakistan and initially entered the oil refining business through the formation of Bosicor Pakistan Limited (BPL), now Byco Petroleum Pakistan Limited (BPPL), a refinery with a design capacity of 30,000 barrels per day (bpd) and listed in all three stock exchanges of Pakistan.
In February 2008, realizing the immense potential that Byco possesses, Abraaj Capital Limited (ACL), a leading private equity firm of Middle East, North Africa and South Asia (MENASA), joined hands with BBI. Under the agreed arrangement, a Joint Venture of BBI and ACL in the ratio of 60 and 40 per cent respectively, was established in Mauritius by the name of Byco Industries Incorporated (BII). ACL injected cash equity of over USD135 million for their stake in BOPL through BII in addition to investment already made by BBI in these entities. ACL has provided funds to BII for acquiring additional shareholding of BPPL from the market, through a Mandatory Tender Offer (MTO). BII right now owns 100 per cent of Byco Oil Pakistan Limited (BOPL), 67.3 per cent of BPPL while Universal terminal Limited (UTL) is 100 per cent owned by BPPL.
BPPL and BOPL were incorporated with a primary objective to proactively invest to develop infrastructure and system in order to become the standard source for meeting the economies chemicals, energy, petroleum, and petrochemical requirements, while ensuring the highest standard of environment, health, safety, and security.
Byco and its associated entities have interests in the oil refining, petroleum marketing, chemical manufacturing and infrastructure & logistics in Pakistan.
Byco Petroleum Pakistan Limited (BPPL) - Oil Refining & Petroleum Marketing - has been set up in line with government of Pakistan's Petroleum Policy 1997, which offers a range of incentives to companies investing in oil & gas industry.
BPPL was incorporated in Pakistan as a public limited company on January 09, 1995 and was granted the certificate of commencement of business on March 13, 1995. The company is engaged in the business of processing and refining of imported as well as local crude oil into various saleable components including High Speed Diesel (HSD), Liquefied Petroleum Gas (LPG), Motor Spirits (MS), High Octane Blending Components (HOBC), Kerosene (K-Oil), Jet Fuels, Furnace Oil and Naphtha.
Oil refinery is located at Mouza Kund, District Hub, Lasbela, Balochistan. The company started its commercial production from July 1, 2004 and now its total refining capacity is over 36,000 barrels per stream day after debottlenecking/turnaround of the whole plant.
BPPL is the only refinery in Pakistan, which has acquired marketing license from the start of its operation. During the year 2007, the company has launched its fuel marketing activities managed by the Petroleum Marketing Business (PMB). PMB has developed progressively during this period and is now growing aggressively, so far around 190 retail outlets have been set up, primarily focusing on retail segment, and PMB is now expanding the canvas by targeting to become a dominant player in the industrial, international and retail segments. Going forward, PMB will be increasing its product portfolio by adding LPG and lubricants as well.
Plans are also underway to make LPG available at the filling stations, as well as to market LPG cylinders with the company's brand through a distribution network and launch branded lubricants for the automotive and industrial sectors which will be available at the filling stations as well as in the commercial markets.
PMB is focusing and planning to cater to the international opportunities available in the region where it can provide petroleum and lubricant products.
With ever-increasing competition in the market today, availability of product is a major challenge for all oil marketing companies (OMCs). Byco has a distinctive advantage through its refinery to meet the product requirement in the south of the country.
While Byco has developed infrastructure that will assist in the delivery of product to the consumers at their doorstep, to cater to the fast growing requirements of the business in other parts of the country, arrangements are being put in place to acquire products through other sources, like the White Oil Pipeline, as well as purchases from other refineries and oil marketing companies.
BOPL is in process of relocation, another mothballed, Hydro-skimming petroleum refinery with a crude refining capacity of 115,000 barrels per stream day, from United Kingdom. The project is being set up next to Byco's existing refinery, on 100 acres leased Site in Mouza Kund estate, owned by Byco at District Hub, Lasbela, Balochistan. Over 90 per cent of the installation and erection work has been completed and commercial operation is targeted to commence in 2011.
CHEMICAL MANUFACTURING BUSINESS
With a vision to maximize the synergies in the petrochemicals sector, the sponsors are in the process of relocating and setting up a petrochemical complex, beside refinery, at a 75 acres leased site in Mouza Kund estate, owned by Byco at District Hub, Lasbela, Balochistan.
This shall be the first petrochemicals complex in Pakistan with an initial capacity of 17,100 bbls per day to produce petrochemical products such as Raffinate, C-9, Benzene, Mixed Xylene, Para Xylene, and Ortho Xylene to meet the country's deficit requirements.
Universal Terminal Limited (UTL) - Infrastructure & Logistics -, a fully owned subsidiary of BPPL, is an infrastructure company, set up to facilitate the logistics of petroleum products. To start with, UTL has invested in a dedicated Jet Fuel Petroleum Storage Terminal at Karachi Port as well as a Petroleum Storage Terminal totaling 140,000 metric tons (MT) at the Refineries Site (Balochistan). The company is also in the process of developing Pakistan's first Single Point Mooring (SPM) with a Phase 1 capacity of 100,000 deadweight tonnage (DWT) with 28 inch 15 km pipeline and port facilities with the accompanying infrastructure. In the initial phase, the SPM facility will handle logistics for two Byco refineries by connecting the SPM to the refineries shore tanks enabling direct discharge of crude oil.