SIFC Implementation Committee: $6bn refineries upgrade project under threat

Petroleum Division officials said they wanted to impose a 1-3 percent GST on these POL products

By Khalid Mustafa
September 06, 2024
A representational image shows Total Energies employees walking in the Donges oil refinery in Donges, on September 8, 2023. — AFP
A representational image shows Total Energies employees walking in the Donges oil refinery in Donges, on September 8, 2023. — AFP

ISLAMABAD: The FBR top mandarins told the Special Investment Facilitation Council (SIFC) that the budgetary measure of sales tax exemption on diesel, petrol, kerosene oil and light diesel oil imposed in the FY25 Finance Bill cannot be withdrawn without the IMF’s approval.

The Petroleum Division officials said they wanted to impose a 1-3 percent GST on these POL products to initiate $5-6 billion investments in upgrade projects of five local refineries. They were told that any change in the Finance Bill is not possible at a time when Pakistan is seeking a new loan programme with the IMF Executive Board.

A meeting of the Implementation Committee of SIFC was held here on Thursday with Muhammad Jehanzeb Khan, SAPM on SIFC, a senior official who was part of the meeting told The News. The official inferred from the FBR’s viewpoint that the investment of $ 5-6 billion in the Upgrade Project of Refineries under the Brownfield Policy may be further delayed.

The refineries are not prepared to undertake the upgrading arguing that the sales tax exemption on HSD, MS, LDO and kerosene oil has rendered it economically unviable and significantly affected the Internal Rates of Return (IRRs). “The tax exemption has already severely impacted existing refining operations.”

Besides, it would also negate the impact of government’s proposed seven-year incentive package worth $1.6 billion. The Implementation Committee of SIFC asked the Finance, and Petroleum Division to develop a doable plan in this regard so that the refineries upgrading could start.

About the implementation of amended E&P policy 2012, the Petroleum Division informed the Implementation Committee of SIFC that it would submit the framework in the next meeting of the task force on gas-related issues headed by Deputy Prime Minister Senator Ishaq Dar.

The implementation committee, meanwhile, asked the Petroleum Division to sit with JJVL management and SSGC to thrash out an agreement to operationalise the project and submit its compliance report to the Apex Committee of SIFC.