ISLAMABAD: Pakistan’s oil industry has voiced strong opposition to a proposed windfall tax on inventory gains in the upcoming federal budget and expressed concern over delays in the payment of outstanding Price Differential Claims (PDCs), warning that the sector is facing severe liquidity pressures.
In a letter addressed to Prime Minister Shehbaz Sharif, the Oil Companies Advisory Council (OCAC), which represents more than 30 oil marketing companies (OMCs) and refineries, sought an urgent meeting to discuss issues affecting the financial sustainability of the downstream petroleum sector.
OCAC Chairman Asif Iqbal said the country’s oil industry is grappling with mounting financial challenges due to delayed recoveries, rising operational costs, increasing compliance requirements, and policy uncertainties.
According to the OCAC, while approximately Rs54 billion in verified Price Differential Claims have been released, around Rs66 billion remains outstanding. The claims relate to losses incurred by oil companies due to the supply of petroleum products at lower prices during the initial phase of the US-Iran conflict.
“The prolonged delay in the settlement of these claims has severely affected cash flows and created a significant liquidity crisis for oil marketing companies,” the council stated, urging the government and the Oil and Gas Regulatory Authority (OGRA) to ensure the release of all pending claims by June 8.
The industry has also raised concerns over reports that the government is considering imposing a tax on inventory gains resulting from increases in international oil prices. The proposal is reportedly being reviewed by a high-powered committee examining the petroleum pricing and cross-subsidy mechanism.
While supporting a review of the system, the OCAC argued that any framework targeting inventory gains must also account for inventory losses when international oil prices decline. The council noted that oil companies are required under existing regulations to maintain a mandatory 20-day stock cover and therefore should be treated fairly under any new taxation mechanism.
Another key concern highlighted by the industry is the delay in revising marketing margins for OMCs and petroleum dealers. The council noted that margins have remained unchanged since September 2023 despite inflation and rising operating costs, placing additional financial strain on the sector and discouraging investment in critical infrastructure.
The OCAC called for the introduction of a transparent and predictable annual margin adjustment mechanism to ensure the long-term sustainability of the petroleum supply chain.
The industry also expressed reservations about the mandatory installation of Level-3 fast electric vehicle (EV) chargers at petrol stations, arguing that the requirement involves substantial investment costs and may not be commercially viable until EV adoption, local manufacturing, and supporting infrastructure reach a more mature stage.
Furthermore, the council said the requirement to include EV charging facilities in K-Form approvals for new retail outlets is delaying the commissioning of completed fuel stations, discouraging new investments, and diverting capital away from essential infrastructure projects.
The OCAC urged the government to develop a commercially viable implementation framework for EV charging infrastructure and provide corresponding support through appropriate marketing margins and incentives.
Industry leaders warned that without timely policy intervention, delayed claim settlements, taxation uncertainties, and mounting compliance costs could undermine the financial stability of Pakistan’s downstream petroleum sector and affect future investment in energy infrastructure.
Story by Khaleeq Kiani
