ISLAMABAD – The Special Investment Facilitation Council (SIFC) on Wednesday deliberated on the future of \$6 billion refinery upgrade projects, following the IMF’s rejection of key government tax proposals aimed at supporting the oil refining sector.
The government had earlier sought to restore zero-rated tax status and impose a 10% sales tax on petroleum products (POL) to facilitate refinery modernization. However, the IMF turned down both proposals, urging the government to submit alternative measures.
Sources familiar with the meeting said the authorities would continue to engage IMF officials until the FY2025–26 budget is approved by parliament, emphasizing the strategic importance of refinery upgrades. If unsuccessful, the government plans to revise the brownfield refinery policy to offer enhanced incentives and ensure the projects proceed on schedule.
To temporarily offset losses incurred by refineries due to tax exemptions—estimated at Rs34 billion in the outgoing fiscal year—the government has increased the Inland Freight Equalization Margin (IFEM) by Rs1.87 per litre. This measure, however, only provides relief until June 2026, and the IMF has expressed reservations about its continuation beyond that point.
Refineries insist that lenders will not approve financing unless the government provides a 6–7 year tax resolution framework, matching the timeline for the planned upgrades. Once complete, the upgrades would enable domestic production of Euro-V compliant fuels and significantly reduce the reliance on environmentally harmful furnace oil.
