ISLAMABAD: The Special Investment Facilitation Council (SIFC) has instructed authorities to revise the Brownfield Refinery Policy 2023 by September 31, 2025, aiming to revive stalled refinery upgrade projects worth \$6 billion. The move comes amid a lingering deadlock with the International Monetary Fund (IMF) over sales tax exemptions that has rendered the projects economically unviable.
According to minutes from the SIFC Executive Committee’s June 18 meeting—released on July 1—the Petroleum Division has been tasked with formally communicating final, non-extendable deadlines for resolving the tax issue. If no resolution is reached, the policy will be amended within three months to introduce additional fiscal incentives to ensure project viability.
The dispute centers on the sales tax exemption on petroleum products introduced in the FY25 Finance Bill, which has made crude oil imports ineligible for input tax adjustments, thereby slashing internal rates of return (IRRs) for refinery upgrades. The IMF rejected government proposals for restoring zero-rated status and imposing a uniform 10% sales tax, citing the Federal Board of Revenue’s (FBR) weak enforcement track record, including past issues like under-invoicing in solar imports.
Industry stakeholders warn that the current policy risks undermining the government’s \$1.6 billion, seven-year incentive package for upgrading refineries to produce Euro-V standard fuels. At a meeting in May, refinery CEOs urged the petroleum and finance ministries to resolve the tax issue in the FY26 budget and ensure a stable seven-year tax policy to support long-term investments.
While awaiting a long-term solution, Petroleum Minister Ali Pervaiz Malik has secured temporary relief through an ECC decision to increase the Inland Freight Equalisation Margin (IFEM) by Rs1.87 per litre for 12 months, aimed at offsetting Rs34 billion in projected losses for refineries and oil marketing companies (OMCs) through June 2025.
Separately, the SIFC has also greenlit the restart of the JJVL LPG-NGL extraction plant—idle since June 2020—under an agreement between Sui Southern Gas Company (SSGC) and Jamshoro Joint Venture Limited (JJVL). The plant is slated to resume operations by July 31, 2025, with internal gas consumption to be charged at a rate equivalent to the Weighted Average Cost of Gas (WACOG) as determined by Ogra.
Story by Khalid Mustafa
