ISLAMABAD, 2025 — Pakistan’s oil industry has sounded the alarm, warning that the sector is nearing a breaking point due to persistent financial and operational challenges that have yet to be resolved by the government and regulators.
In a formal letter to the Chairman of the Oil and Gas Regulatory Authority (OGRA), with a copy sent to the Federal Minister for Petroleum, the Oil Companies Advisory Council (OCAC) outlined several critical issues affecting oil marketing companies (OMCs) and refineries nationwide.
The industry flagged key concerns, including delayed sales tax refunds, exchange rate losses, port infrastructure bottlenecks, and the rising cost of mandatory digitalisation at fuel retail outlets.
Industry Still Awaiting Promised Relief
OCAC reminded OGRA that during a recent meeting involving the Petroleum Division, OGRA officials, and oil companies, the petroleum minister had directed the regulator to work closely with stakeholders and deliver time-bound solutions.
However, months later, the issues remain unresolved, pushing many companies into serious liquidity and operational strain.
Rs73 Billion GST Refunds Still Pending
A major concern is the continued delay in General Sales Tax (GST) refunds.
According to OCAC:
- Rs73 billion in GST refunds remain stuck with the Federal Board of Revenue
- The pending amount covers April 2022 to June 2024
- The delay has significantly strained oil companies’ cash flows
Although GST for FY2025 is partly being adjusted through the Inland Freight Equalisation Margin (IFEM), the industry says the relief is insufficient.
OCAC has proposed a structured reimbursement plan, including:
- Payment of GST exemption costs from July 2025 onward
- Compensation for financing costs on delayed refunds (April 2022–June 2024) at KIBOR + 2%
Once agreed with OGRA, these proposals are expected to be submitted to the Prime Minister for approval.
Exchange Rate Losses Deepening Financial Stress
Exchange loss recovery is another major sticking point.
Oil companies argue the current system:
- Does not accurately reflect actual exchange losses
- Is slow and lacks transparency
- Creates distortions, especially when no imports occur during a pricing cycle
OCAC has urged OGRA to:
- Expedite verification of exchange loss claims
- Introduce a standardized and transparent formula
- Ensure timely adjustments so companies are not forced to absorb losses
Retail Digitisation: Expensive and Rushed
The industry has also expressed concern over Phase-3 digitisation of petrol pumps.
While companies support digital monitoring, they warn that:
- Implementation deadlines are too aggressive
- Compliance costs are high
- No effective cost-recovery mechanism exists
OCAC has requested OGRA to review the timelines and introduce a transparent reimbursement framework to prevent financial pressure on companies.
Port Constraints Increasing Costs
Logistics and port limitations are adding further strain. Key issues include:
- Shallow port channels
- Limited night navigation
- Lack of a dedicated petrol pipeline at the Fotco terminal
These bottlenecks are leading to heavy demurrage charges and increasing overall fuel supply costs.
OCAC has urged OGRA to coordinate with port authorities to:
- Upgrade infrastructure
- Allow recovery of verified additional costs through IFEM
Call for Urgent OGRA Meeting
OCAC has strongly emphasized that, in line with the petroleum minister’s directions, OGRA should immediately convene a joint meeting with industry stakeholders.
The objective is to:
- Finalize clear implementation timelines
- Approve recovery mechanisms
- Provide policy certainty to the oil sector
Final Thoughts
As Pakistan moves further into 2025, the oil industry is grappling with rising costs, regulatory uncertainty, and delayed payments simultaneously.
Industry experts caution that unless these issues are resolved promptly and fairly, fuel supply stability and investor confidence could come under serious threat. A transparent, predictable, and collaborative regulatory approach is now essential to keep Pakistan’s oil sector financially sustainable and operationally resilient in the years ahead.