Pakistan’s oil industry has issued a serious warning: without swift action from the government and regulators, the sector could soon reach a point of disruption. Years of unresolved financial pressures, operational hurdles, and infrastructure constraints have pushed the industry into a precarious position.
In a strongly worded letter to the OGRA Chairman, the Oil Companies Advisory Council (OCAC) — also copying the petroleum minister — outlined a list of critical problems that continue to pile up despite earlier commitments from officials. A previous meeting with the Petroleum Division, OGRA and oil marketing companies (OMCs) ended with the petroleum minister directing OGRA to craft clear, time-bound solutions. The industry says progress is still missing.
Billions in GST Refunds Still Outstanding
The most urgent concern raised by the OCAC is the massive backlog of general sales tax (GST) refunds. According to the industry, approximately Rs73 billion in refunds for the period April 2022 to June 2024 remain stuck with the FBR. These delays have significantly squeezed the liquidity of OMCs and refineries, affecting their ability to manage operations smoothly.
Although the government is adjusting GST refunds for FY25 through the Inland Freight Equalization Margin (IFEM), the industry stresses that this does not resolve earlier pending claims. The OCAC has therefore suggested a structured refund mechanism that:
-
Covers sales tax exemptions from July 2025 onward
-
Includes financing costs on backlogged refunds (April 2022–June 2024), calculated at KIBOR + 2%
They want this framework finalized with OGRA and then forwarded to the prime minister for approval.
Exchange Rate Loss Formula Needs an Overhaul
Currency fluctuations have long been a major issue for oil importers, and the OCAC says the current setup for recovering exchange rate losses simply doesn’t reflect actual market conditions. The existing method is inconsistent and often fails to account for periods where no imports take place — leaving companies to absorb unrecognized losses.
The industry is calling for:
-
A transparent, standardised formula
-
Quick validation of exchange loss claims
-
Predictable timing for adjustments
According to the OCAC, an updated mechanism is essential to eliminate distortions and ensure fairness across all companies.
Digitization Requirements Too Tight — and Unfunded
The government’s push for Phase-3 digitization of retail outlets is another major challenge. While the industry supports modernization, it argues that the implementation deadlines are unrealistic and that it is being forced to bear substantial costs without any reimbursement plan.
The OCAC has asked OGRA to revisit the timeline and establish a clear, transparent system that allows companies to recover their digitization expenses.
Port Infrastructure Shortfalls Adding Heavy Costs
Operational inefficiencies at ports are further straining the sector. Issues such as insufficient channel depth, restricted night-time vessel movement and the absence of a dedicated motor spirit pipeline at Fotco have resulted in prolonged delays and high demurrage charges.
OCAC wants OGRA to coordinate with port authorities to address these limitations and guarantee that legitimate port-related costs can be reclaimed through IFEM.
Industry Pushes for Immediate, Coordinated Response
With pressures mounting across multiple fronts, the OCAC has urged OGRA to promptly convene a meeting with the industry to finalize timelines, methodologies and approval processes. The council says the sector cannot afford further delays and needs concrete, time-bound actions before these longstanding issues escalate into operational disruptions.