The Petroleum Division will issue its final, non-extendable timelines to resolve a big sales tax exemption issue in order to revise the Brownfield Refinery Policy 2023 by September and rescue $6 billion worth of refinery upgrade projects.
The projects were stalled due to the sales tax dispute with the International Monetary Fund (IMF). The deadlock is due to the Finance Bill 2025, which exempts petroleum products from sales tax. This change disqualifies crude oil imports from input tax adjustment, making refinery upgrades financially unviable.
Refineries say this sharply lowers their internal rate of return (IRR) and renders projects infeasible.
Even the IMF rejected Pakistan’s proposals to restore zero-rating or apply a 10 percent sales tax.
The exemption jeopardises a $1.6 billion, seven-year government incentive package. In May 2025, refinery CEOs urged resolution in the FY26 budget and demanded tax stability for seven years to support investment in Euro-V fuel production.
To provide short-term relief, Petroleum Minister Ali Pervaiz Malik secured ECC approval for a Rs. 1.87/litre increase in the Inland Freight Equalisation Margin (IFEM) for 12 months. This aims to offset Rs. 34 billion in expected losses for refineries and oil marketing companies (OMCs) through June 2025.
Separately, the JJVL LPG-NGL extraction plant will be restarted under an agreement between Sui Southern Gas Company (SSGC) and Jamshoro Joint Venture Limited (JJVL). The plant will resume operations by July 31, 2025, and gas used internally will be charged at the Weighted Average Cost of Gas (WACOG), as determined by OGRA.
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