Islamabad, Pakistan – Web Desk: Prime Minister Shehbaz Sharif is expected to address long-standing bottlenecks in the Brownfield Refinery Policy as the Cabinet Committee on Energy (CCoE) meets on Tuesday to consider amendments that could determine the fate of billions of dollars in refinery upgrade investments .
Dispute Over Deemed Duty Protection
The proposed amendments have sparked serious concern within the refining sector over a plan to retrospectively reduce deemed duty protection from 7.5% to 5%, effectively penalising refineries for delays that, according to industry representatives, were caused by the government itself .
Government sources maintain the reduction is based on refineries’ failure to sign Upgrade Agreements within the stipulated timeframe. However, refinery officials strongly reject this claim, arguing that all companies had accepted the draft Upgrade Agreement in 2024 and were merely awaiting the government’s call for a formal signing ceremony at the Prime Minister’s House .
“The agreements were never delayed because of the refineries,” a senior industry official said. “The industry completed its part of the process and repeatedly requested the Petroleum Division, OGRA and other government forums to execute the agreements” .
Tax Changes Compound Industry Concerns
The controversy comes after the Finance Act 2024 shifted major petroleum products from the zero-rated to the exempt sales tax regime, depriving refineries of input tax adjustment and substantially increasing unrecoverable sales tax costs . The Petroleum Division has acknowledged that these tax changes adversely affected the economics of refinery upgrades and delayed implementation of the policy .
Policy Objectives and Investment
The Brownfield Refinery Policy, approved in August 2023, was designed to unlock an estimated $5-6 billion in investment for modernising Pakistan’s five existing refineries . The upgrades aim to enable production of Euro-V compliant fuels, reduce furnace oil output, and improve the country’s fuel mix .
Industry representatives argue that the 7.5% tariff protection mechanism has remained in place for more than two decades, making the proposed reduction to 5% both unprecedented and unfair .
OGRA’s Reservations
Regulatory sources indicate that OGRA has serious reservations about remaining a signatory to the Upgrade Agreements. OGRA Chairman Masroor Khan has repeatedly raised the issue, arguing that the regulator’s role should be confined to regulation rather than becoming a contractual party to commercial agreements .
What to Expect
The Prime Minister is expected to address outstanding issues that have delayed implementation of the Brownfield Refinery Policy since its approval in August 2023 . The Petroleum Division has proposed limited amendments to operationalise the policy while preserving its original objectives and recommended constituting a committee comprising the Secretary Petroleum, Secretary Law, the OGRA chairman and a representative of the Special Investment Facilitation Council (SIFC) to finalise the Upgrade Agreement template .
The refining industry hopes the CCoE will remove the remaining policy hurdles without retrospectively altering the agreed incentive framework, arguing that policy consistency is critical to unlocking long-awaited investments in refinery modernisation and strengthening Pakistan’s energy security .
