ISLAMABAD: In a key meeting under the Special Investment Facilitation Council (SIFC) has directed the Petroleum Division to extend the Upgradation Agreements deadline and resolve the ongoing sales tax issue for refineries by November 10, 2024.
According to sources privy to the development, the SIFC’s working group on downstream policy met on October 22, 2024, led by Dr. Jehanzeb Khan, Special Assistant to the Prime Minister and Chairman of the SIFC Apex Committee. The meeting brought together top officials from the Oil and Gas Regulatory Authority (OGRA), Federal Board of Revenue (FBR), and CEOs of key refineries.
The refinery sector, represented by Adil Khattak, Chairman of the Oil Companies Advisory Council (OCAC) and CEO of Attock Refinery Ltd., raised multiple concerns, including the financial strain due to unresolved tax issues, the impact of rampant petroleum product smuggling, and the uncontrolled import of high-speed diesel (HSD). He emphasized that the resolution of these issues is crucial to the viability of local refineries and the successful signing of the Brownfield Refinery Policy 2023, which aims to modernize Pakistan’s refinery sector. The delay, he noted, has led to an estimated annual foreign exchange loss of $1 billion. CEOs from other major refineries participated virtually, echoing similar concerns.
During the meeting, OGRA shared updates on efforts to combat petroleum smuggling. According to Chairman OGRA, a coordinated approach involving law enforcement agencies, district administrations, and OGRA is underway. The authority recently expanded its inspection team by hiring additional engineers tasked with identifying and shutting down illegal outlets involved in selling smuggled petroleum products.
SIFC directed the Petroleum Division to prioritize resolving the sales tax exemption issues impacting refinery profitability. According to sources, SIFC also underscored the need to support OGRA’s efforts to control smuggling and improve regulatory compliance in collaboration with provincial and local administrations. SIFC has further instructed the Petroleum Division to work closely with the Finance Division and FBR to address the tax concerns affecting refineries by the November 10 deadline.
In addition, SIFC directed the Petroleum Division to present a detailed plan for eliminating illegal petroleum retail outlets and curbing the sale of substandard fuel by November 7, 2024. OGRA was assigned the responsibility of overseeing market fuel quality, with instructions to clamp down on substandard and non-compliant products. The Chairman of OGRA has been asked to provide written certification affirming strict adherence to regulatory guidelines for importing and utilizing refinery stock.
FBR was also instructed to prepare a timeline-based plan to resolve outstanding tax refunds related to Oil Marketing Companies (OMCs) by November 7, 2024, as sources indicated that unresolved tax matters have heavily impacted the financial stability of refineries. The directive, it is hoped, will alleviate financial pressures on refineries and help streamline their operations. Additionally, SIFC tasked the Petroleum Division, OGRA, and provincial governments with collaborative action to tackle petroleum smuggling and ensure the availability of quality fuels in the market.
To bolster the local refinery sector, SIFC has directed OGRA to prioritize output from domestic refineries. When imports are necessary, Pakistan State Oil (PSO) will be the first to import the required volume, with other Oil Marketing Companies (OMCs) following. This policy is intended to maximize the utilization of local refinery capacity and limit dependency on imports, ensuring support for the domestic refining industry.
Dr. Jehanzeb Khan also addressed the urgency of implementing the Brownfield Refinery Policy, as the current deadline for upgradation agreements had been set to expire on October 22, 2024. The Petroleum Division has now been asked to prepare a summary requesting an extension for these agreements, as further delays could cost the government billions in lost revenue. Upgrading refineries under this policy is critical for reducing dependence on imported petroleum and enhancing Pakistan’s energy security.
The meeting concluded with a consensus that swift implementation of these directives is essential to support the refinery sector, maintain operational stability, and safeguard the country’s energy future. Industry stakeholders are optimistic that these measures will foster competitiveness and contribute to sustainable energy development in Pakistan, with positive impacts expected across the refinery sector and related industries.
