ISLAMAABD: The Oil Companies Advisory Council (OCAC) has approached the Prime Minister, Shehbaz Sharif for removal of GST exemption on petroleum products and increase in margins of Oil Marketing Companies (OMCs).
The Oil Companies Advisory Council (OCAC), is an independent organization formed by Refineries, Oil Marketing Companies (OMCS) and a Pipeline Company. Its roles and objectives are to represent the Downstream Oil Industry at various Government and Non-Government forums in matters relating to its members (list of members is attached) to ensure continued viability of the downstream sector.
On behalf of our member companies, OCAC has pointed out two key challenges currently faced by the Industry i.e. removal of sales tax exemption on petroleum products and revision in OMCs margins.
According to the OCAC, the Finance Act 2024 changed the sales tax status of petroleum products from zero rated to exempt supplies which has led to disallowance of input sales tax claims, causing a substantial increase in operational and capital costs.
The change in sales tax law is severely impacting the financial viability of our planned upgrade projects, infrastructure development, and day-to-day operations. The continuation of this exemption will result in significant erosion in profitability and severe financial strain on the Industry, jeopardizing the progress and sustainability of crucial capital-intensive projects essential for the uninterrupted supply of petroleum products nationwide thus nullifying the objectives of the Brownfield Refining Upgradation Policy which was approved by the government under your dynamic leadership in August 2023.
OCAC is of the view that despite continuous follow-ups over the past seven months and active coordination with the Ministry of Energy Petroleum Division (MEPD), Oil and Gas Regulatory Authority (OGRA), Federal Board of Revenue (FBR), Ministry of Finance (MOF), and the Special Investment Facilitation Council (SIFC), the issue remains unresolved.
“This matter is critical for the survival of the Industry in Pakistan, and its prolonged delay is causing significant challenges. We respectfully seek your urgent intervention to facilitate an amicable and swift resolution,” said Adil Khattak Chairman OCAC.
On the revision of OMCs margin, OCAC has stated that OMC Margin revision was due in September 2024, however, the same has not been finalized as yet. In June 2024, OCAC had recommended increase based on critical cost considerations, including financing costs of maintaining a 20-day stock cover, turnover tax, handling losses, demurrage costs, financing cost of unadjusted Sales Tax and operating expenses incurred by OMCs.
“Immediate revision of the margin is essential to prevent further financial losses,” Mr. Khattak said, requesting Prime Minister’s support in ensuring the earliest possible revision of OMC margins.
The Council has further stated that it has now left with no option but to seek Prime Minister’s support and requested for an urgent meeting with him to discuss and resolve these critical issues.
