KARACHI: Pakistan’s oil industry is expected to incur financial losses of Rs 35 billion in the current fiscal year due to the sales tax exemption on petroleum products introduced in the Finance Act 2024.
Industry estimates indicate that refineries will bear losses of Rs 18 billion, while oil marketing companies (OMCs) could face a hit of Rs 17 billion.
The exemption, which applies to motor spirit (petrol), high-speed diesel, kerosene, and light diesel oil, has prevented companies from claiming proportionate input tax, significantly increasing operational costs. The ongoing uncertainty has also slowed refinery upgrade agreements with the Oil & Gas Regulatory Authority (Ogra), as the new petroleum minister has yet to engage with industry representatives.
Industry insiders warn that the continuation of the tax exemption will erode profitability and place severe financial strain on the sector, jeopardizing critical projects essential for ensuring an uninterrupted fuel supply. Refinery upgrades—requiring investments exceeding $6 billion—remain stalled due to the unresolved tax issue.
Once completed, these projects would enable local refineries to produce Euro V-compliant fuels. Additionally, increased diesel production could reduce Pakistan’s dependence on fuel imports, preserving valuable foreign exchange.
A senior oil executive told The News that if the government considers their request, the exemption could be removed in the next budget cycle. The industry has already approached the Special Investment Facilitation Council (SIFC) and the prime minister to resolve the issue, but no breakthrough has been achieved so far.
