ISLAMABAD: The government is set to hold a high-level meeting on Tuesday (today) to address long-standing policy issues delaying Pakistan’s $6 billion refinery upgradation programme, as authorities seek to revive investment in the energy sector and strengthen fuel production capacity.
The meeting at the Ministry of Finance Pakistan will bring together key officials, including the finance minister, petroleum minister, chairman of the Federal Board of Revenue, senior Petroleum Division officials, and chief executives of local refineries.
A central agenda item is a proposal to increase and fix the Inland Freight Equalisation Margin (IFEM) by Rs1.87 per litre for six to seven years. Industry stakeholders believe a long-term guaranteed margin would stabilise refinery revenues, support oil marketing companies, and improve access to financing for long-delayed upgrade projects.
The refinery sector has been under pressure since the FY25 budget introduced a sales tax exemption on petroleum products, including petrol and diesel. While aimed at providing consumer relief, the measure restricted refineries from claiming input tax adjustments, significantly weakening the financial viability of ongoing and planned capital investments.
As a result, several refinery upgrade projects have remained stalled since mid-2024 due to uncertainty and weakened investor confidence.
Officials are also expected to push for the restoration of tax exemptions on imported refinery equipment, machinery, and spare parts, aligning them with incentives available under the Greenfield refinery policy.
In addition, the Petroleum Division is likely to seek approval from the International Monetary Fund to formalise a stable, multi-year IFEM framework, along with policy guarantees aimed at improving regulatory certainty and attracting long-term investment in the downstream oil sector.
Story by Khalid Mustafa
