Pakistan’s oil refineries had plans to invest $6 billion in upgrades, but those plans have been stuck since June 2024. This week, the government called a high-level meeting to fix that and get the investment moving again, TheNews reported.
Background Story of $6 Billion Upgrades
Local refinery companies had plans to invest $6 billion to modernize them. But those plans have been stuck since June 2024, and nothing has moved.
Why?
The problem began after petrol, diesel, kerosene, and light diesel oil were exempted from sales tax. That helped avoid a sales-tax burden on consumers, but it also blocked refineries from adjusting input taxes paid on operations and on imports.
It accidentally blocked refineries from getting back the taxes they had already paid on their expenses.
This punched a hole in the refinery’s finances, and they could no longer afford to proceed with upgrades. Foreign investors and lenders also backed out.
What the Government Did This Week
To solve this, the government called a meeting at the Finance Ministry. The finance minister, petroleum minister, FBR chairman, and heads of all local refineries sat together to find a way out.
The main solution discussed was giving refineries a fixed extra earning of Rs 1.87 per liter on fuel for the next six to seven years. This gives refineries a guaranteed, stable income so they can go back to banks and investors to secure earnings loans to upgrade.
The government also discussed removing taxes on machinery that refineries need to import and obtaining IMF approval to make this plan official.
Why This Matters
If refineries are not upgraded, Pakistan will keep buying expensive refined fuel from other countries. Upgrading local refineries means fewer imports, cheaper fuel in the long run, and stronger energy security for the country.
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