ISLAMABAD: State-owned Pakistan State Oil (PSO) has urged the government to introduce zero-rating on jet fuel and petroleum products to prevent the accumulation of sales tax refunds, as delays by the Federal Board of Revenue (FBR) have severely strained the company’s liquidity.
PSO is currently awaiting the release of Rs54 billion in sales tax refunds accumulated during the financial year 2024-25. The prolonged withholding of these refunds has choked the company’s cash flow, forcing it to seek government intervention to maintain smooth fuel supply operations nationwide.
In a letter to the Petroleum Division, PSO management highlighted that significant sales tax refunds remain pending with the FBR despite repeated follow-ups. The outstanding amount of Rs54 billion has adversely affected the company’s working capital and its ability to meet day-to-day operational requirements.
The company noted that the sharp increase in net sales tax receivables has put additional pressure on cash flows, leading to greater reliance on short-term borrowings and, consequently, higher financing costs. PSO said it had earlier requested expedited settlement of refunds, but with no relief forthcoming, it is now seeking policy-level support.
PSO has proposed zero-rating of jet fuel and petroleum products as a long-term solution to reduce the buildup of refund claims, ensure the immediate release of pending refunds and prevent similar liquidity issues in the future. The management expressed confidence that timely resolution would help the company sustain uninterrupted energy supplies and maintain financial stability.
Separately, PSO also faces challenges on the liquefied natural gas (LNG) front. The company imports LNG from Qatar under a government-to-government agreement but has come under pressure due to the power sector’s reluctance to lift committed supplies. To avoid excess inventories, PSO recently reached an agreement with a Qatari firm to divert 24 LNG cargoes during 2026.
Circular debt continues to weigh heavily on the company. As of March 2025, PSO’s total receivables stood at Rs732 billion, including Rs325 billion in principal owed by Sui Northern Gas Pipelines Limited (SNGPL). Late payment surcharges are estimated at around Rs200 billion.
However, PSO noted that since February 2024 there has been no fresh circular debt buildup from SNGPL, following an understanding that payments would be made on a monthly basis—a commitment that is currently being honoured.
The company also pointed out that the recent increase in petroleum product margins by the government is expected to positively impact PSO’s financial position. In addition, PSO has expanded its retail network by opening 67 new outlets alongside enhanced storage capacity, with further expansion planned in the coming years.
Story by Zafar Bhutta
