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Business Recorder
04-07-2025
- Business
- Business Recorder
PL imposition on furnace oil: OICCI urges authorities to engage with key stakeholders
ISLAMABAD: Expressing serious concerns over imposition of heavy Petroleum Levy (PL), the Overseas Investors Chamber of Commerce and Industry (OICCI) urged the authorities to engage with the key stakeholders on this issue, including both foreign and local investors. In a letter to Petroleum Minister, Ali Pervaiz Malik, Secretary General OICCI, Abdul Aleem conveyed dismay on behalf OICCI, which represents over 200 of the largest foreign investors in Pakistan, including more than 30 leading companies across the upstream and downstream energy sectors. 'We express our concern over the imposition of a Petroleum Levy (PL) of Rs 82,077 per metric ton on Furnace Oil (FO), effective July 1, 2025. This levy, in addition to the existing Climate Support Levy (CSL) of Rs2,665 per metric ton, is projected to increase the price of FO by nearly 80 percent,' he said adding that such a substantial price hike risks making FO economically unviable for several critical sectors, including large-scale industrial units. OCAC seeks SIFC intervention over petroleum levy on furnace oil He further contended that OICCI supports the government's broader objectives of revenue generation and environmental sustainability but it is concerned about the lack of stakeholder consultation prior to the introduction of such significant measures. 'Abrupt fiscal changes of this nature not only create uncertainty but also risk undermining industrial competitiveness, dampening domestic manufacturing, and carries the risk of reduced overall tax revenues for the country,' he continued. The OICCI has recommended the adoption of a sustained, predictable, and phased policy approach. He said providing businesses with adequate lead time enables them to plan, evaluate implications, and implement changes in an orderly manner. In contrast, abrupt policy shifts with short compliance windows compel companies to respond reactively, often at the expense of long-term planning and growth. 'A clear, consultative framework that provides adequate time for adaptation, pre and post consultation process essential to promote business confidence and long-term investment. The OICCI urged the relevant authorities to urgently engage with the key stakeholders on this issue, including both foreign and local investors, to ensure that fiscal reforms support the shared objective of industrial growth, competitiveness, and economic stability,' he concluded. The OICCI has also sent the copies of the letter to Finance Minister, Senator Muhammad Aurangzeb and Chairman Federal Board of Revenue (FBR), Rashid Mehmood Langrial. Copyright Business Recorder, 2025
Express Tribune
03-07-2025
- Business
- Express Tribune
New levies to raise fuel oil prices
OCAC urged the Special Investment Facilitation Council to intervene and recommend the withdrawal of petroleum and climate support levies on furnace oil, which would help restore policy consistency and support critical sectors. PHOTO: FILE Listen to article The Oil Companies Advisory Council (OCAC) has cautioned the Special Investment Facilitation Council (SIFC) that the climate support and petroleum levies on furnace oil have become effective from July 1, 2025, which will raise its price by over 80%, making many industries, shipping services and independent power producers (IPPs) unviable. In a letter sent to SIFC, OCAC Chairman Adil Khattak said that the advisory council and its member companies had expressed deep concern and protested over the imposition of petroleum levy of Rs82,077 per metric ton on furnace oil through the Finance Act 2025. "This levy, in addition to the Climate Support Levy of Rs2,665 per metric ton, poses a serious threat to the overall business environment," he said. "While we acknowledge and appreciate the support extended by the Special Investment Facilitation Council in securing an interim relief from the government – through the recovery of inadmissible general sales tax (GST) on petroleum products via the inland freight equalisation margin (IFEM), this remains a temporary measure with limited scope," he said and demanded a sustainable solution by restoring the taxable status of currently exempt petroleum products, ie, motor spirit (petrol), high-speed diesel (HSD), kerosene oil and light diesel oil (LDO). He called SIFC's continued support pivotal until full and permanent resolution of the matter. Khattak stated that the abrupt imposition of levies on furnace oil without prior consultation with the industry reflects a complete disconnect from the economic and operational challenges being faced by the sector. Furnace oil is a deregulated product and its pricing is governed by market forces. It is mainly used to meet energy needs of the domestic industry. "The imposition of such a substantial fiscal burden will have widespread and adverse financial repercussions across multiple business sectors, threatening their viability and long-term sustainability," he remarked. OCAC said that the new levies would increase furnace oil prices by approximately 80%, making its use economically unviable for key industries such as cement, shipping, textile, glass, tyre manufacturing, large-scale industrial units, foundries and other sectors reliant on boilers and furnaces (commonly referred to as general trade). This drastic price increase would eliminate domestic furnace oil demand and cause a sharp decline in industrial activity, potentially resulting in partial or complete operational shutdowns, especially where no viable fuel alternatives exist, it warned. In the letter, OCAC underscored that this measure was in direct contradiction to the government's stated commitment to promoting domestic manufacturing. Rather than enhancing revenues, it is likely to significantly reduce or eliminate furnace oil sales within the country, thereby slashing associated sales tax revenues and undermining industrial competitiveness. "It will also defeat the objective of collecting the envisaged revenue through the imposition of petroleum and climate support levies." In the absence of domestic demand, the advisory council said, local refineries would be forced to export furnace oil at a considerable financial loss. This will further strain the financial condition of Pakistan's refining sector and compromise its sustainability. It pointed out that the government had recently renegotiated tariffs with furnace oil-based IPPs but the new levies would substantially increase fuel costs, pushing those plants lower on the merit order and rendering them inactive. "This will nullify the gains from recent renegotiations while still obligating the government to make capacity payments, effectively increasing the burden on national finances." In light of the above, OCAC urged SIFC to intervene and recommend the withdrawal of petroleum and climate support levies on furnace oil. It believes this will help restore policy consistency, support critical sectors of the economy and uphold the principles of fair and sustainable economic development. "We remain committed to engaging in constructive dialogue and are available for an urgent meeting to further discuss this matter in the national interest," the OCAC chairman added.
Business Recorder
02-07-2025
- Business
- Business Recorder
OCAC seeks SIFC intervention over petroleum levy on furnace oil
The Oil Companies Advisory Council (OCAC) has sought intervention from the Special Investment Facilitation Council (SIFC) over the government's decision to impose a petroleum levy (PL) of Rs82,077 per metric ton on furnace oil (FO), Business Recorder learnt on Wednesday. '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. President Zardari gives assent to Finance Bill 2025 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.
