Islamabad, October 16, 2024 – Adil Khattak, Chairman of the Oil Companies Advisory Council (OCAC), has called on the government to urgently address key challenges facing Pakistan’s downstream oil sector, warning that unresolved issues threaten the country’s refinery operations and long-term energy security. In an exclusive Q&A with Energy Update, Khattak highlighted the immediate need for government intervention to resolve the sales tax exemption on petroleum products and curb smuggling from Iran.
Khattak emphasized the critical impact of the Federal Board of Revenue’s (FBR) decision through the Finance Act, 2024, which changed the status of petroleum products—including Mogas, Diesel, Kerosene, and Light Diesel Oil (LDO)—from taxable to exempt supplies. He noted that this shift has effectively nullified the incentives envisioned under the Brownfield Refining Policy, jeopardizing both current refinery operations and future upgrade projects. With an October 22, 2024 deadline for signing the Implementation Agreements (IAs), Khattak stressed that immediate government action is essential to resolve the issue.
In addition to the sales tax concerns, Khattak underscored two other pressing threats to the refinery sector: the unabated smuggling of petroleum products from Iran and the import of High-Speed Diesel (HSD) in violation of petroleum rules. He pointed out that smuggling alone accounts for around 20% of Pakistan’s annual consumption, resulting in significant revenue losses of approximately $1 billion annually.
Khattak further noted that local refineries are struggling with falling capacity utilization due to these challenges, and the $6 billion investment in refinery upgrades is at risk if policy issues are not addressed. He expressed hope that the Special Investment Facilitation Council (SIFC) could play a pivotal role in resolving these issues, but cautioned that further delays could jeopardize critical investment opportunities for Pakistan.
