Govt expected to hold oil prices
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The government is likely to keep domestic oil prices unchanged from May 1, 2025, amid minor fluctuations in international markets.
According to projections, Premium Motor Gasoline (PMG) may see a negligible drop of Rs0.16/litre — a 0.1% decrease — at both ex-refinery and ex-depot levels. High-Speed Diesel (HSD), widely used in transport and agriculture, is expected to remain virtually unchanged with a Rs0.01/litre increase. As diesel impacts inflation, the stable pricing offers some relief.
However, Kerosene may increase by Rs1.30/litre (0.9%), and LDO by Rs1.35/litre (1.0%). Prices are calculated based on current taxes, the Inland Freight Equalisation Margin (IFEM), and zero US dollar exchange adjustment. PMG's premium currently stands at $5.464 per barrel, with two days of Platts data yet to be factored in.
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Business Recorder
21-05-2025
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Pakistan govt set to slap GST on POL products, hike petroleum levy
ISLAMABAD: The government has reportedly decided to increase the petroleum levy from Rs80 to Rs90 per litre and to impose a 3–5 percent General Sales Tax (GST) on petroleum products to support local refineries, well-informed sources told Business Recorder. The move also aims at ensuring the timely implementation of fortnightly petroleum price revisions. The decision was taken by the Economic Coordination Committee (ECC) of the Cabinet on May 13, 2025, and was subsequently ratified by the Federal Cabinet on May 20, 2025. During a briefing to the ECC, the Petroleum Division explained that petroleum products—including Mogas, diesel, kerosene, and light diesel oil (LDO)—had been classified as 'exempt' under the Finance Act 2024-25. As a result, input sales tax became a cost burden for refineries and Oil Marketing Companies (OMCs), amounting to approximately Rs34 billion for FY 2024-25. Last 3-1/2 months of FY25: petroleum levy hike by Rs18.02 to generate Rs90bn revenue This cost cannot be passed on to consumers due to government-regulated petroleum pricing, which is determined by the Oil and Gas Regulatory Authority (OGRA) under federal policy. A draft proposal to levy a 3–5 percent GST on motor spirit (MS) and high-speed diesel (HSD) was developed in consultation with the oil industry, the Ministry of Finance, and the Federal Board of Revenue (FBR). However, it could not be implemented due to the lack of agreement with the International Monetary Fund (IMF) on taxing these products at reduced GST rates. Applying the standard 18 percent GST would result in a price increase of approximately Rs45 per litre for MS and HSD, which the government considers undesirable. Any change to the GST rate would require prior consultation with the IMF and approval from Parliament. In addition to the GST matter, the ECC also approved an increase in margins for OMCs and petroleum dealers by Rs1.13 and Rs1.40 per litre, respectively, to ensure the sustainability of the oil supply chain. OGRA's initial recommendations on the matter were reviewed, and certain amendments were made before final approval. To partially address the financial issue of the refineries, OMCs and Dealers, the following proposals were submitted for consideration: (i) since the petroleum products (Mogas, Diesel, Kerosene and LDO) are exempted from sales tax during current financial year, the refineries and OMCs' unadjusted sales tax during July 2024-June 2025 of these products may be compensated through IFEM (estimated Rs34 billion). The amount may be recovered in 12 months and recovery of this item will cease from the 13th month automatically; (ii) for FY 2025-26, 3-5 percent sales tax Mogas/HSD products may be imposed through Finance Act, however, in case the products remain exempted from sales tax in the FY 2025-26, the unadjusted sales tax may continue to be compensated through IFEM as a fall back option to keep the oil supply chain sustainable; (iii) the margins of OMCs and Petroleum Dealers may be enhanced to keep their business sustainable; and (iv) OGRA will develop a mechanism for adjustment of GST claims for above period and effective utilization of digitization cost along-with implementation timelines within one month of approval. Full cost of the digitization will be borne by OMCs throughout the supply chain including outlets. The Petroleum Division further briefed the forum that on the basis of these proposals, indicative impact on prices of MS and HSD will be as follows: (i) refinery and OMCs' unadjusted sales tax (Rs28 billion for July-April, 2024-25) and (Rs6 billion for May –June, 2025) recovery timeframe at Rs1.87 per litre; (ii) OMCs margins (including digitization cost) will have an impact of Rs1.13 per litre; and (iii) Petroleum Dealer's Margin, Rs1.12 per unit. Total impact will be Rs4.12 per litre. However, after discussion, the ECC decided that OMCs' and Refineries unadjusted sales tax of FY25 may be compensated from May 16, 2025, through IFEM (estimated Rs34 billion to be verified by OGRA). The amount may be recovered till end of FY26 on the following rates and recovery of this item will cease subsequently after: (i) HSD sales tax adjustment at Rs2.09 per litre; and (ii) Mogas, Rs1.07 per litre. Copyright Business Recorder, 2025
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ISLAMABAD: The government has reportedly decided to increase the petroleum levy from Rs80 to Rs90 per litre and to impose a 3–5 percent General Sales Tax (GST) on petroleum products to support local refineries, well-informed sources told Business Recorder. The move also aims at ensuring the timely implementation of fortnightly petroleum price revisions. The decision was taken by the Economic Coordination Committee (ECC) of the Cabinet on May 13, 2025, and was subsequently ratified by the Federal Cabinet on May 20, 2025. During a briefing to the ECC, the Petroleum Division explained that petroleum products—including Mogas, diesel, kerosene, and light diesel oil (LDO)—had been classified as 'exempt' under the Finance Act 2024-25. As a result, input sales tax became a cost burden for refineries and Oil Marketing Companies (OMCs), amounting to approximately Rs34 billion for FY 2024-25. Last 3-1/2 months of FY25: petroleum levy hike by Rs18.02 to generate Rs90bn revenue This cost cannot be passed on to consumers due to government-regulated petroleum pricing, which is determined by the Oil and Gas Regulatory Authority (OGRA) under federal policy. A draft proposal to levy a 3–5 percent GST on motor spirit (MS) and high-speed diesel (HSD) was developed in consultation with the oil industry, the Ministry of Finance, and the Federal Board of Revenue (FBR). However, it could not be implemented due to the lack of agreement with the International Monetary Fund (IMF) on taxing these products at reduced GST rates. Applying the standard 18 percent GST would result in a price increase of approximately Rs45 per litre for MS and HSD, which the government considers undesirable. Any change to the GST rate would require prior consultation with the IMF and approval from Parliament. In addition to the GST matter, the ECC also approved an increase in margins for OMCs and petroleum dealers by Rs1.13 and Rs1.40 per litre, respectively, to ensure the sustainability of the oil supply chain. OGRA's initial recommendations on the matter were reviewed, and certain amendments were made before final approval. To partially address the financial issue of the refineries, OMCs and Dealers, the following proposals were submitted for consideration: (i) since the petroleum products (Mogas, Diesel, Kerosene and LDO) are exempted from sales tax during current financial year, the refineries and OMCs' unadjusted sales tax during July 2024-June 2025 of these products may be compensated through IFEM (estimated Rs34 billion). The amount may be recovered in 12 months and recovery of this item will cease from the 13th month automatically; (ii) for FY 2025-26, 3-5 percent sales tax Mogas/HSD products may be imposed through Finance Act, however, in case the products remain exempted from sales tax in the FY 2025-26, the unadjusted sales tax may continue to be compensated through IFEM as a fall back option to keep the oil supply chain sustainable; (iii) the margins of OMCs and Petroleum Dealers may be enhanced to keep their business sustainable; and (iv) OGRA will develop a mechanism for adjustment of GST claims for above period and effective utilization of digitization cost along-with implementation timelines within one month of approval. Full cost of the digitization will be borne by OMCs throughout the supply chain including outlets. The Petroleum Division further briefed the forum that on the basis of these proposals, indicative impact on prices of MS and HSD will be as follows: (i) refinery and OMCs' unadjusted sales tax (Rs28 billion for July-April, 2024-25) and (Rs6 billion for May –June, 2025) recovery timeframe at Rs1.87 per litre; (ii) OMCs margins (including digitization cost) will have an impact of Rs1.13 per litre; and (iii) Petroleum Dealer's Margin, Rs1.12 per unit. Total impact will be Rs4.12 per litre. However, after discussion, the ECC decided that OMCs' and Refineries unadjusted sales tax of FY25 may be compensated from May 16, 2025, through IFEM (estimated Rs34 billion to be verified by OGRA). The amount may be recovered till end of FY26 on the following rates and recovery of this item will cease subsequently after: (i) HSD sales tax adjustment at Rs2.09 per litre; and (ii) Mogas, Rs1.07 per litre. Copyright Business Recorder, 2025
Express Tribune
14-05-2025
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Listen to article The Petroleum Division has sought the endorsement of Prime Minister Shahbaz Sharif for increasing profit margins of oil marketing companies (OMCs) and dealers and settling the losses of refineries. Sources said that the Petroleum Division had tabled a summary before the Economic Coordination Committee (ECC), seeking an increase of Rs1.18 per litre in margins for the OMCs and dealers. It also sought approval for the recovery of financial losses of oil refineries and OMCs amounting to Rs34 billion due to sales tax exemption on petroleum products. It proposed that the oil industry should be allowed to charge Rs1.87 per litre through the inland freight equalisation margin (IFEM) to recover the losses of Rs34 billion. The third proposal was that the government should impose a 5% general sales tax (GST) on petroleum products in the upcoming budget for fiscal year 2025-26 to shield the oil industry from losses in the wake of sales tax exemption. Sources said that the ECC had agreed to those proposals, but sought the consent of the prime minister. They said that the first two proposals should be implemented immediately, while the third, pertaining to the imposition of sales tax, was linked to the International Monetary Fund (IMF). Therefore, the government may implement it in the upcoming budget. The ECC was informed that petroleum products – motor gasoline (Mogas), high-speed diesel (HSD), kerosene and light diesel oil (LDO) – had been classified as "exempted" under the Finance Act 2024. As a result, the input sales tax has become a cost incurred by the refineries and OMCs (estimated at Rs34 billion for financial year 2024-25) and it cannot be recovered through product prices, as these are regulated and fixed by the Oil and Gas Regulatory Authority (Ogra) under the government's policy. A draft proposal to levy 3-5% sales tax on motor spirit (MS) and HSD had been prepared in consultation with the oil industry, Finance Division and Federal Board of Revenue (FBR). However, it could not be implemented due to the IMF's refusal to allow the reduced GST on those products. It may be noted that the standard GST rate of 18% for MS/HSD will result in a price increase of around Rs45 per litre, which is not desirable. Any changes in the sales tax rate will require prior consultation with the IMF as well as approval from parliament. Additionally, the OMCs and petroleum dealers have requested an increase in their margins on MS and HSD. In this regard, Ogra has recommended an increase of Rs1.13 and Rs1.40 per litre, respectively, to ensure the sustainability of oil supply chain. Ogra's recommendations have been reviewed and certain amendments have been suggested in the summary. To partially address the financial issues of refineries, OMCs and dealers, the following proposals have been submitted for consideration: The Petroleum Division said that since petroleum products (Mogas, diesel, kerosene and LDO) were exempt from sales tax during the current financial year, the unadjusted sales tax for refineries and OMCs from July 2024 to June 2025 on those products may be compensated through the IFEM (estimated at Rs34 billion). The amount may be recovered over 12 months. It was further highlighted that for FY26, a 3-5% sales tax on the aforementioned products may be imposed through the Finance Act. However, in case these products remain exempt from sales tax, the unadjusted sales tax may continue to be compensated through the IFEM as a fallback option to keep the oil supply chain sustainable. The margins of OMCs and petroleum dealers may be enhanced to maintain their business viability. The Petroleum Division said that Ogra would develop a mechanism for the adjustment of GST claims for the above period and ensure effective utilisation of digitisation costs, along with implementation timelines, within one month of approval. The full cost of digitisation will be borne by the OMCs throughout the oil supply chain, including at outlets.
