The Oil Companies Advisory Council (OCAC) has raised alarm over newly imposed levies on furnace oil, warning the Special Investment Facilitation Council (SIFC) that the additional charges could push prices up by more than 80%, rendering many industries, shipping operations, and independent power producers (IPPs) economically unviable.
In a formal communication to the SIFC, OCAC Chairman Adil Khattak expressed serious concern over the imposition of a petroleum levy of Rs82,077 per metric ton, introduced through the Finance Act 2025, along with a Climate Support Levy of Rs2,665 per ton — both effective from July 1. He warned that this combined fiscal burden poses a severe threat to the country’s industrial and economic landscape.
Khattak acknowledged the SIFC’s earlier efforts in securing temporary relief via the recovery of inadmissible general sales tax (GST) through the inland freight equalisation margin (IFEM), but emphasised the need for a long-term, sustainable solution. He urged the restoration of the taxable status for currently exempt petroleum products such as petrol, high-speed diesel, kerosene, and light diesel oil.
Highlighting the sudden nature of the levies, he criticised the lack of consultation with industry stakeholders, calling it a reflection of the disconnect between policy decisions and the operational realities faced by the energy sector. Since furnace oil pricing is deregulated and determined by market forces, Khattak warned that the steep hike in costs would severely disrupt industrial operations across sectors like cement, textiles, glass, shipping, tyre manufacturing, foundries, and other heavy users of industrial boilers and furnaces.
“The imposition of such significant levies will have wide-reaching financial consequences, making furnace oil economically unfeasible and pushing many businesses toward partial or full shutdowns,” the letter warned.
OCAC also noted that eliminating domestic demand for furnace oil would not only hurt local industries but force refineries to export the product at a loss, further destabilising Pakistan’s already struggling refining sector.
The council also highlighted a major policy contradiction: while the government has been working to promote domestic manufacturing and recently renegotiated tariffs with furnace oil-based IPPs, the new levies could negate those efforts. Increased fuel costs would push these power plants down the merit order, sidelining them and still obligating the government to make capacity payments — thus adding to fiscal pressure.
OCAC concluded by urging the SIFC to recommend immediate withdrawal of the petroleum and climate support levies on furnace oil to restore market confidence, protect vital industries, and maintain policy coherence.
“We stand ready for constructive dialogue and request an urgent meeting to discuss this issue in the broader national interest,” Khattak added.
