SIFC’s intervention sought: OCAC, members say concerned over imposition of PL on furnace oil

ISLAMABAD: The Oil Companies Advisory Council (OCAC) and its member companies have expressed deep concern and strong protest regarding the imposition of a petroleum levy (PL) of Rs82,077 per metric ton on furnace oil (FO), effective July 1, 2025, through the Finance Act, 2025, seeking Special Investment Facilitation Council (SIFC)’s intervention in the matter.

In a letter to the SIFC national coordinator, OCAC Chairman Adil Khattak has stated that this levy comes in addition to climate support levy (CSL) of Rs2,665 per metric ton on FO, and poses a serious threat to the overall business environment in the country.

“While we acknowledge and sincerely appreciate the support extended by the SIFC in securing interim relief from the Government of Pakistan through recovery of inadmissible general sales tax (GST) on petroleum products through the Inland Freight Equalization Margin (IFEM) mechanism, we would like to emphasise that this remains a temporary measure with limited scope.

A sustainable solution requires the restoration of the taxable status of currently exempt petroleum products i.e. motor spirit (MS), high-speed diesel (HSD), kerosene, and light diesel oil (LDO).

The SIFC’s continued support is pivotal till the full and permanent resolution of this matter. The abrupt imposition of PL and CSL on FO without prior consultation with the industry signals a total disconnect from the economic and operational challenges currently being faced by the industry.

FO is a deregulated product, and its pricing is governed by market forces. It is mainly used for meeting energy needs of our domestic industry.”

He said the imposition of such a substantial fiscal burden will have widespread and adverse financial repercussions across multiple sectors of businesses, threatening their viability and long-term sustainability.

The letter stated: In this context, we respectfully submit the following points for your urgent consideration: The imposition of PL and CSL will increase FO prices by approximately 80 per cent, making its use economically unviable for key industries such as cement, shipping, textiles, glass, tyre manufacturing, large-scale industrial units, foundries, and other sectors relying on boilers and furnaces (commonly referred to as general trade). This drastic price increase will eliminate FO domestic demand and drive a sharp decline in industrial activity, potentially resulting in partial or complete operational shutdowns-especially where no viable fuel alternatives exist.

This measure stands in stark contrast to the Government of Pakistan’s stated commitment to promoting domestic manufacturing. Rather than enhancing revenues, it is likely to significantly reduce or eliminate FO sales within the country, thereby, decreasing associated sales tax revenues and undermining industrial competitiveness. Additionally, it would also defeat the objective of collection of envisaged revenue by imposing PL and CSL on FO.

Khattak stated that the imposition of climate support and petroleum levies on FO effective July 1, 2025 will raise its price by more than 80 per cent making many industries, shipping and IPPs unviable.

“It is fashionable to blame IMF for everything under the sun but the two probable reasons given: to cut down carbon emissions or meet the revenue shortfall do not justify this ill-advised decision,” he said, adding that if industrial and power production is to be sacrificed to reduce greenhouse emissions then would not Thar coal be the next target; after all the Bretton Woods Institutions both IMF and World Bank discourage use of coal. The revenue expected from PL is also going to be a pipe dream as the price increase would wipe off local sales.

Copyright Business Recorder, 2025