OCAC seeks SIFC intervention over petroleum levy on furnace oil
'On behalf of the Oil Companies Advisory Council and its member companies, we express our deep concern and strong protest regarding the imposition of a Petroleum Levy of Rs82,077 per metric ton on Furnace Oil, effective July 1, 2025, through the Finance Act, 2025,' the OCAC wrote in a letter to the SIFC, dated July 1, 2025.
'This levy comes in addition to Climate Support Levy (CSL) of Rs2,665 per metric ton on FO, and poses a serious threat to the overall business environment in the country,' it added.
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In a separate statement, OCAC chairman Adil Khattak said the imposition of climate support and petroleum levies on FO would raise its price by more than 80% making many industries, shipping and independent power producers (IPPs) unviable.
'It is fashionable to blame IMF [International Monetary Fund] for everything under the sun but the two probable reasons given: to cut down carbon emissions or meet the revenue shortfall do not justify this ill advised decision.
'If industrial and power production is to be sacrificed to reduce greenhouse emissions then wouldn't Thar coal be the next target; after all the Bretton Woods Institutions both IMF and World Bank discourage use of coal,' he said.
According to Khattak, the revenue expected from the petroleum levy (PL/PDL) is also going to be 'a pipe dream' as the price increase would wipe off local sales.
'The refineries forced to export it's total FO production would face substantial loss due to increase in logistics cost and discounted export prices causing substantial dent in their upgrade plans already on hold due to non- resolution of the sales tax issue on permanent basis in spite of numerous meetings and assurances.
'We expect support from Petroleum Minister who, within a short period of assuming office, has proved his grit not only in understanding complex challenges but taking these head-on. We also hope that SIFC would play an effective role in withdrawal of PDL on FO and permanent resolution of the sales tax issue paving the way for the long awaited $6 billion investment in refineries upgrade,' Khattak said.
FO is a deregulated product, and its pricing is governed by market forces. It is mainly used for meeting energy needs of domestic industry.
The OCAC in the letter argued that the imposition of what it called a substantial fiscal burden would have widespread and adverse financial repercussions across multiple sectors of businesses, threatening their viability and long-term sustainability.
'This measure stands in stark contrast to the Government of Pakistan's stated commitment to promoting domestic manufacturing. Rather than enhancing revenues, it is likely to significantly reduce or eliminate FO sales within the country, thereby decreasing associated sales tax revenues and undermining industrial competitiveness. Additionally, it would also defeat the objective of collection of envisaged revenue by imposing PL and CSL on FO.'
Downstream oil sector deregulation: OCAC refuses to endorse any future road map
The letter further stated that imposition of PL and CSL would substantially increase fuel costs, and it also would nullify the gains from recent renegotiations with the IPPs while still obligating the government to make capacity payments effectively increasing the burden on national finances without any corresponding benefit.
'In light of the above, we strongly urge SIFC to intervene and recommend the withdrawal of the PL & CSL on FO. This will help restore policy consistency, support critical sectors of the economy, and uphold the principles of fair and sustainable economic development,' OCAC said.
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