Pakistan’s Oil Industry Under Pressure: Companies Urge OGRA for Immediate Action in 2025
ISLAMABAD, 2025 — Pakistan’s oil industry has raised serious concerns, warning that the sector is close to a breaking point due to long-standing financial and operational problems that remain unresolved by the government and regulators.
In a formal letter addressed to the Chairman of the Oil and Gas Regulatory Authority (OGRA) — and copied to the Federal Minister for Petroleum — the Oil Companies Advisory Council (OCAC) highlighted multiple critical issues that are hurting oil marketing companies (OMCs) and refineries across the country.
These issues include delayed sales tax refunds, exchange rate losses, port infrastructure problems, and the high cost of forced digitalisation at fuel retail outlets.
Industry Waiting for Promised Solutions
OCAC reminded OGRA that during a recent meeting with the Petroleum Division, OGRA officials, and oil companies, the petroleum minister had clearly directed the regulator to work closely with the industry and present time-bound solutions.
However, months later, the problems remain unresolved — pushing companies into serious liquidity and operational stress.
Rs73 Billion Sales Tax Refunds Still Stuck
One of the most pressing issues is the non-payment of General Sales Tax (GST) refunds.
According to OCAC:
- Rs73 billion in GST refunds are still pending with the FBR
- These refunds relate to the period April 2022 to June 2024
- The delay has badly affected cash flows of oil companies
While GST for FY2025 is partially being adjusted through the Inland Freight Equalisation Margin (IFEM), the industry says this is not enough.
OCAC has proposed a clear reimbursement mechanism, including:
- Payment of GST exemption costs from July 2025 onward
- Compensation for financing costs on delayed GST refunds (April 2022–June 2024) at KIBOR + 2%
These proposals, once agreed with OGRA, are expected to be presented to the Prime Minister for approval.
Exchange Rate Losses Creating Financial Imbalance
Another major concern is exchange rate loss recovery.
Oil companies say the current mechanism:
- Does not reflect real exchange losses
- Is slow and unclear
- Creates unfair distortions, especially when no imports take place in a pricing cycle
OCAC has asked OGRA to:
- Quickly verify exchange loss claims
- Introduce a standard and transparent formula
- Ensure timely adjustments so companies are not forced to absorb losses
Retail Digitisation: Costly and Rushed
The industry has also raised concerns over Phase-3 digitisation of petrol pumps.
While companies support digital monitoring, they argue that:
- Timelines are too tight
- Implementation costs are high
- No proper cost-recovery system exists
OCAC has requested OGRA to review deadlines and introduce a transparent reimbursement mechanism so companies are not financially burdened.
Port Problems Adding Extra Costs
Port and logistics issues are another pain point. These include:
- Shallow port channels
- Limited night navigation
- Absence of a dedicated petrol pipeline at Fotco terminal
These issues result in heavy demurrage costs, increasing fuel supply expenses.
OCAC has urged OGRA to coordinate with port authorities to:
- Improve infrastructure
- Allow recovery of verified extra costs through IFEM
Call for Immediate Meeting with OGRA
OCAC has strongly emphasized that, in line with the petroleum minister’s instructions, OGRA must immediately call a joint meeting with industry stakeholders.
The goal is to:
- Finalize clear timelines
- Approve recovery mechanisms
- Provide certainty to the oil sector
Final Thoughts
As Pakistan moves deeper into 2025, the oil industry is facing rising costs, regulatory uncertainty, and delayed payments — all at the same time.
Industry experts warn that unless these issues are resolved quickly and fairly, fuel supply stability and investor confidence could be at risk.
A transparent, predictable, and collaborative regulatory approach is now critical to ensure that Pakistan’s oil sector remains financially viable and operationally stable in the years ahead.