SIFC Secretariat Urges Government Action on Oil Industry Crisis

The Special Investment Facilitation Council (SIFC) Secretariat, operating under the Prime Minister’s Office, has urgently contacted various government bodies to address critical issues plaguing Pakistan's oil industry. The sector is currently grappling with financial losses amounting to PKR 91 billion, as highlighted in a letter from the Oil Marketing Association of Pakistan (OMAP). This letter sheds light on the key challenges that are impacting the industry's financial stability and operational efficiency.

One of the primary concerns is the accumulation of PKR 26 billion in unrecovered exchange losses due to deficiencies in the foreign exchange gain/loss recovery system. Despite acknowledgments from the Ministry of Energy and the Oil & Gas Regulatory Authority (OGRA), the reimbursement process is moving at a sluggish pace. Furthermore, the reduction of sales tax on petroleum products to 0% has resulted in a holding of PKR 65 billion in funds, leading to cash flow constraints due to delayed refunds.

Another significant issue is the prolonged delay in audits related to the Inland Freight Equalization Margin (IFEM), causing funds to remain tied up for over eight years. This delay has diminished the value of the received funds, adversely affecting the industry's cash flow.

The SIFC Secretariat has requested input from key government entities, including the Ministry of Energy (Petroleum Division), OGRA, and the Federal Board of Revenue (FBR), within a specified timeframe. The Chairman of OMAP emphasizes that these financial challenges not only impact the operational efficiency of oil marketing companies but also pose a threat to the industry's survival.

The industry is currently facing liquidity challenges due to unrecovered exchange losses, delayed sales tax refunds, and funds stuck in the IFEM, totaling PKR 91 billion. Resolving these financial hurdles is imperative to ensure the stability of the oil sector and attract additional investments, both domestic and foreign, in Pakistan's energy industry. Addressing these challenges will be a crucial step in upholding the industry's role in the country's economic advancement.

The urgent need for government intervention to address the financial woes of Pakistan's oil industry underscores the critical nature of the situation. By resolving these challenges, the industry can regain stability, foster growth, and contribute significantly to the nation's economic progress.