ISLAMABAD: The Oil Companies Advisory Council (OCAC) has raised alarm over new government-imposed levies on furnace oil, warning that the resulting price hike—exceeding 80%—could cripple key industries, independent power producers (IPPs), and the shipping sector.
In a letter to the Special Investment Facilitation Council (SIFC), OCAC Chairman Adil Khattak strongly protested the imposition of a petroleum levy of Rs82,077 per metric ton and a Climate Support Levy of Rs2,665 per metric ton under the Finance Act 2025. These levies took effect from July 1, 2025.
Khattak called the move “a serious threat to the overall business environment,” stressing that the abrupt implementation without industry consultation reflects a lack of understanding of the economic challenges at stake.
He acknowledged SIFC’s prior support in securing interim relief on inadmissible GST recovery through the Inland Freight Equalisation Margin (IFEM), but emphasized that a long-term solution is necessary. OCAC demanded the restoration of the taxable status of currently exempt petroleum products like petrol, diesel, kerosene, and LDO.
Furnace oil, a deregulated fuel used extensively by the domestic industry, is now projected to become economically unviable due to the new levies. “This drastic fiscal burden will adversely impact multiple sectors—cement, textiles, glass, tyres, foundries, shipping, and large-scale industrial units—many of which rely on boilers and furnaces with no feasible fuel alternatives,” the OCAC warned.
The council cautioned that the move contradicts the government’s industrial promotion agenda and could lead to widespread operational shutdowns. It also undermines recent tariff renegotiations with furnace oil-based IPPs by increasing their operating costs, potentially pushing them down the merit order while still requiring capacity payments from the government.
OCAC also warned of a collapse in domestic demand, which could force local refineries to export furnace oil at a loss, threatening the refining sector’s sustainability.
Calling for urgent intervention, OCAC urged SIFC to recommend the immediate withdrawal of the levies. “This is essential to maintain policy consistency, protect critical industries, and ensure sustainable economic development,” Khattak stated, offering to engage in further dialogue in the national interest.
