KIEV, July 17 – The Ukrainian government should impose import duties on heavy oils, as oil refining is falling and imports of fuel are growing, according to TNK-BP Commerce Vice President, Feliks Lunev.

"I think that the introduction of import duties on heavy oils and not on light fuel would be a logical step. For example, the basket of heavy oils at the Lysychansk oil refinery is larger than at an average medium-sized European refinery. A similar situation is seen at other Ukrainian refineries," he said in an interview with the Argus sector edition.

He said that CJSC LINIK, which exploits the Lysychansk oil refinery, could increase bitumen output instead of fuel oil without large investment.

He said that last year, only 230,000 tons of bitumen was produced, while there was the possibility to produce 700,000 tons per year due to the fact that imports were equal to bitumen output in Ukraine.

Lunev explains the situation by the fact that importers used notes payable for VAT payments and cut invoices, and bitumen that was produced at the Lysychansk oil refinery was uncompetitive.

Lunev said that the government should cancel grey schemes for VAT payments to settle the situation. In addition, the cabinet should take steps to reconstruct companies and improve the quality of products, such as tax vacation, postponement of VAT payments during the upgrades and VAT reimbursement to oil refineries for exported products.

At present, the non-returned sum exceeded $105 million.

Lunev also said that there are positive points in the government's participation in oil refining. The state had very competently boosted production of diesel fuel with 50 ppm sulfur content, he said. (om/ez)