The oil industry has warned that it is nearing a breaking point due to the government’s and regulator’s failure to address long-standing financial, operational and infrastructure issues — including pending sales tax refunds, exchange rate loss recovery, port bottlenecks and the upcoming digitisation of retail outlets.
In a letter to Oil and Gas Regulatory Authority (OGRA) Chairman, the Oil Companies Advisory Council (OCAC) — also copying the petroleum minister — outlined critical challenges previously discussed with officials from the Petroleum Division, OGRA and oil marketing companies (OMCs). At that meeting, the petroleum minister had directed OGRA to engage with the industry and produce time-bound solutions.
OCAC urges OGRA to convene urgent meeting on sales tax recovery, exchange losses and port constraints
As a follow-up, the OCAC has submitted a formal list of issues requiring urgent resolution. Foremost among them is the reimbursement of general sales tax (GST) claims. Industry-wide GST refunds of Rs73 billion remain pending with the Federal Board of Revenue (FBR) for April 2022 to June 2024, severely straining liquidity. While FY25 GST adjustments are being made through the inland freight equalisation margin (IFEM), companies are seeking a structured mechanism for clearing all outstanding claims.
The OCAC has proposed a reimbursement framework covering sales tax exemption costs (from July 2025 onwards) and financing costs on unadjusted GST (April 2022 to June 2024) at Kibor plus 2% for both OMCs and refineries. These recommendations are to be finalised with OGRA before being taken to the prime minister.
Another major concern is the exchange loss recovery mechanism, which the industry says does not reflect actual losses arising from exchange rate volatility. The current framework lacks a transparent, equitable and timely adjustment formula, creating distortions — especially when no imports or settlements occur during a pricing period. The OCAC has urged OGRA to authenticate claims quickly and adopt a standardised exchange loss formula with predictable adjustment cycles.
The industry has also flagged difficulties in phase-3 digitisation of retail outlets, citing compressed timelines and the absence of a cost-recovery mechanism despite significant implementation expenses. The OCAC has asked OGRA to revisit deadlines and establish a transparent reimbursement structure.
Port-related constraints — such as limited channel depth, restricted night navigation and the lack of a dedicated motor spirit pipeline at Fotco — are also imposing heavy demurrage costs. The OCAC has urged OGRA to coordinate with port authorities for structural upgrades and to ensure verifiable costs are recoverable through IFEM.
The council stressed that, in line with ministerial directions, OGRA should immediately convene a meeting with OCAC and industry stakeholders to finalise timelines, methodologies and approval processes for these pressing issues.
