Refineries Demand Sales Tax Resolution for $6 Billion Upgrades

KARACHI: The landscape of Pakistan's energy sector is currently at a pivotal juncture, as three major refineries—Attock Refinery, National Refinery, and Cnergyico Refinery—are seeking clarity and resolution regarding sales tax issues that are hindering their ambitious upgrade plans. These upgrades, which amount to a staggering $6 billion, are crucial for enhancing the country's refining capacity and meeting the growing energy demands.

In a recent communication to the Oil and Gas Regulatory Authority (Ogra), the refineries clarified that they are not stalling the signing of upgrade agreements. This statement comes in response to Ogra's proposal to reduce the deemed duty on high-speed diesel (HSD) for refineries that do not comply with the Brownfield Refining Policy. The refineries emphasized that they are adhering to the timelines established by this policy and are fully committed to modernizing their facilities.

According to the refineries, agreements related to the upgrades and the establishment of escrow accounts have already been finalized. However, they pointed out that the successful execution of these $6 billion upgrades is contingent upon resolving the ongoing sales tax issue on petroleum products. "We need an urgent solution to the sales tax problem before these agreements can move forward," the refineries stated in their letter to Ogra.

Furthermore, the refineries have urged Ogra and the Ministry of Energy to assist in resolving this pressing issue and have requested an extension of the deadline for signing the agreements. They highlighted that discussions held during the Special Investment Facilitation Council (SIFC) meeting on October 22, 2024, were encouraging, yet the core problem remains unresolved.

In contrast, Pakistan Refinery Limited has already signed its upgrade agreement with Ogra, while Pak-Arab Refinery (Parco) is still in the process of conducting a study to finalize its project. The urgency of resolving these issues cannot be overstated, as the upgrades are not only vital for the refineries but also for Pakistan's overall energy security and economic growth.

The resolution of the sales tax issue is imperative for the future of Pakistan's refining sector. The successful upgrades will not only enhance the efficiency of these refineries but also contribute significantly to the nation's energy needs and economic development. As stakeholders work towards a solution, it is essential to recognize the broader implications of these upgrades for the country's energy landscape.