The federal government has approved a substantial financial relief package to rescue oil refineries and marketing companies from a worsening financial crisis—placing an additional burden on fuel consumers.
According to sources, the Economic Coordination Committee (ECC) has sanctioned an increase of Rs12 per litre in the petroleum levy, raising it to Rs90 per litre. This move is expected to generate Rs34 billion in additional revenue from consumers.
Following this approval, the prices of petrol and high-speed diesel (HSD) will rise by Rs1.87 per litre, which will be collected from consumers over a 12-month period.
Furthermore, the Petroleum Division and the Ministry of Finance will now be authorised to increase the levy further, subject to formal approval from the Prime Minister.
Sources also stated that the Rs34 billion compensation package for refineries has been formulated to offset their estimated annual losses stemming from the non-recoverable input sales tax on petroleum products, which have been classified as tax-exempt for the current fiscal year.
Payments to the refineries will be made by adjusting the Inland Freight Equalization Margin (IFEM) charges, which are built into the consumer price of petroleum products, they added.
The sources further said that this relief package has come in response to mounting pressure from stakeholders across the oil supply chain, who have raised concerns over unsustainable operating costs and delayed reimbursements.
It is also learned from sources that the government is considering imposing a General Sales Tax (GST) of 3% to 5% on petroleum products in the upcoming federal budget.
However, the decision to raise margins for Oil Marketing Companies (OMCs) and fuel dealers has been deferred for now, pending consultation with the Prime Minister.
It is relevant to note that the Petroleum Division, in its summary titled “Settlement of Financial Issues of Refineries and OMCs” submitted for the consideration and approval of the federal cabinet’s Economic Coordination Committee (ECC), had proposed an increase in OMC margins on petrol and diesel by Rs1.13 per litre, with an identical increase of Rs1.13 per litre planned for dealers.
Currently, the government is already charging a record-high petroleum levy of Rs78 per litre on petrol and diesel, and the latest measures are likely to raise it even further.
The move comes amid growing fiscal pressures and the need to support the domestic oil supply chain, but it will increase costs for consumers already facing inflationary challenges.
