In a letter to the Special Investment Facilitation Council (SIFC), Pakistan’s oil industry has urged to reverse the newly imposed petroleum levy (PL) and climate support levy (CSL) on furnace oil (FO), warning that the charges, totaling Rs84,742 per tonne, could disrupt industrial activity and harm economic stability.
The Oil Companies Advisory Council (OCAC), which represents more than three dozen oil marketing companies and refineries, criticised the levies — Rs82,077 for the PL and Rs2,665 for the CSL. These charges were introduced to help secure a $1.3 billion resilience support facility from the International Monetary Fund (IMF).
The OCAC expressed concern that the levies, which were introduced without consultation, would raise FO prices by nearly 80%. This, it warned, could make the fuel unaffordable for critical industries, including cement, textiles, glass, shipping, tyres, and foundries.
According to the council, FO is a deregulated product, meaning its price is determined by market forces. The additional taxes, it argued, would likely lead to a decline in domestic demand, causing some industrial units to reduce or halt production, particularly in sectors without alternative fuel options.
The council also cautioned that the levies could decrease overall sales tax revenues rather than increase them, as anticipated. Refineries may be forced to export FO at a loss, further weakening the already struggling sector.Â
Additionally, the levies could affect agreements with independent power producers (IPPs), increasing fuel costs and pushing power plants lower in the merit order, possibly making them inactive and leading to higher capacity payments, ultimately burdening public finances.
While acknowledging temporary relief measures previously provided by SIFC, such as the recovery of inadmissible general sales tax (GST), the OCAC urged for a more sustainable solution. It called for a reversal of the levies on FO and for the government to ensure policy consistency, as well as to restore the taxable status of currently exempt petroleum products like motor spirit (MS), high-speed diesel (HSD), kerosene, and light diesel oil (LDO).
The OCAC requested SIFC’s continued intervention to protect vital industries and maintain a stable business environment.
