LAHORE: Oil Marketing Association of Pakistan (OMAP) has called for Prime Minister Muhammad Shehbaz Sharif’s intervention to address challenges being faced by the petroleum industry regarding sales tax and other matters.
In a letter written to Prime Minister Shahbaz Sharif, OMAP Chairman Tariq Wazir Ali said the persistent challenges within the petroleum sector are severely impacting the operational efficiency and growth prospects of oil marketing companies (OMCs), particularly emerging downstream industry, which are the lifeblood of market competition and innovation.
He added, “I urgently request your intervention to address these challenges. The delay in resolving these problems is having a severe impact on the OMC sector, with emerging companies being disproportionately affected.”
While appreciating PM’s tireless efforts to steer country towards progress and stability in the letter dated September 05, 2024, OMAP noted administration’s commitment to economic reforms and infrastructural development, terming it a beacon of hope for many sectors, including petroleum industry.
Talking about zero rated sales tax, Tariq Wazir Ali said that the reduction of sales tax on petroleum products (MS & HSD) to 0% has resulted in a significant inability to recover the paid sales tax, leading to Rs65 billion worth of held funds. This is critically affecting the cash flows of OMCs, with emerging companies facing existential threats due to these financial constraints.
He added that the recent reclassification of POL products, including MS, High-Speed Diesel Oil, Kerosene, and Light Diesel Oil, as exempt goods have far-reaching implications for the operational expenses of OMCs. With the sales tax on freight and capital goods now unclaimable, the sector faces increased costs that strain the already limited working capital, further hampering the financial viability of OMCs, especially smaller and emerging ones.
Regarding delay in sales tax refund, OMAP chairman expressed that the issue of sales tax refunds poses a persistent existential threat to emerging Oil Marketing Companies (OMCs). We request that all the pending cases of sales tax refund should be dealt on war footing basis bringing some relief to struggling OMCs, he said, adding that the bureaucratic delays in processing refunds exacerbate the problem, hindering operational efficiency and growth.
Tariq Wazir added that it is worth to note that the importation of motor fuel cargos has resulted in substantial outstanding amounts owed to OMCs, reaching exorbitant figures to billions of rupees. While formulating a revised mechanism for the recovery of FX losses it is equally important to form an action on the recovery mechanism for previously borne FX losses.
Further adding to the miseries of OMCs is the smuggling of Iranian petroleum products, Tariq Wazir Ali said that OMAP have repeatedly raised our voice against the smuggling of Iranian petroleum products to Pakistan and its transportation to upcountry. The smuggling not only cause a heavy damage to the national exchequer in shape of duty taxes losses, but it also causes great revenue losses both to the refineries and OMC depriving them of the legitimate sale at the prices settled by Ogra, as the smuggled products are sold at cheaper rates.
According to OMAP chairman, “It has come to our attention through the press that this solvent is being extensively used in the adulteration of gasoline, leading to significant repercussions for both the industry and the country at large. The sale of adulterated fuel at illegal fuel stations tarnishes the reputation of legitimate oil companies. The illegal import and sale of this solvent deprives the government of precious revenues that would otherwise be generated through the legitimate sale of gasoline.”