ISLAMABAD: The Oil Companies Advisory Council (OCAC) has urged Prime Minister Shehbaz Sharif to address two critical issues impacting Pakistan’s downstream oil sector: the removal of sales tax exemption on petroleum products and the delayed revision of Oil Marketing Companies (OMCs) margins.
The OCAC emphasized the urgency of resolving these challenges to ensure the industry’s financial viability and uninterrupted fuel supply.
In a letter to the prime minister, OCAC Chairman M. Adil Khattak highlighted the severe repercussions of these issues. He called for immediate government action, underscoring the need for a swift resolution to avert further financial strain on the sector. The OCAC also requested an urgent meeting with the premier to discuss these matters, warning that continued delays could jeopardize the industry’s survival.
The letter explained that the Finance Act 2024 reclassified the sales tax status of petroleum products from zero-rated to exempt supplies. This reclassification has disallowed input sales tax claims, resulting in a sharp increase in operational and capital costs. According to OCAC, this measure undermines the financial viability of crucial infrastructure and upgrade projects essential for sustaining an uninterrupted fuel supply.
Despite seven months of persistent follow-ups with the Ministry of Energy-Petroleum Division, OGRA, the Federal Board of Revenue, the Ministry of Finance, and the Special Investment Facilitation Council, the issue remains unresolved. The OCAC warned that this continued exemption threatens the objectives of the Brownfield Refining Upgradation Policy, approved in August 2023 under the government’s leadership.
The council also raised concerns over the delay in revising OMC margins, which were due in September 2024. A revision proposal submitted in June 2024 accounted for critical cost components, including financing costs for maintaining a 20-day stock cover, turnover tax, operational expenses, and demurrage costs. OCAC stated that the lack of timely adjustment has caused significant financial strain on OMCs and stressed that an immediate revision is essential to prevent further losses.
“We are now left with no option but to seek your support and request an urgent meeting with your esteemed self to discuss and resolve these critical issues,” the letter stated.
The Oil Companies Advisory Council (OCAC) is an independent organization comprising refineries, Oil Marketing Companies, and a pipeline company. Its primary role is to represent the downstream oil industry at various government and non-government forums to ensure the sector’s sustainability and viability.
