Govt to hike IFEM by Rs2.5 per litre for POL products

ISLAMABAD: The Executive Committee of Special Investment Facilitation Council (SIFC) Wednesday asked the Petroleum Division to come up with the way forward in a week to initiate $5-6 billion upgrade projects of local refineries. The committee met here with Federal Minister for Planning and Special Initiatives Ahsan Iqbal in the chair.

Now the authorities concerned have decided to increase the inland freight equalization margin (IFEM) by Rs2.5 per litre for petrol, diesel, kerosene and light diesel oil and the impact would be shifted to the ESCROW accounts to be used by the refineries under an incentive package. The amount would be used for upgrade projects. However, this would be a temporary arrangement till the next budget.

In the SIFC meeting, Ogra has been asked to work out the impact of increase in IFEM and to this effect a summary would be prepared by the Petroleum Division that would be pitched before the ECC for approval. However, Parco that holds 48 percent market share is not in favour of increasing the IFEM saying it is an ad hoc arrangement. It says the government is required to do away with the anomaly of sales tax through the budget. This middle way, the official said, has been found after the failure of the government to resolve the issue of sales tax exemption on POL products imposed in the budget for FY25.

This has barred the refineries from signing the implementation agreement with Ogra which is mandatory prior to initiating their respective upgrade projects of $5-6 billion.

The upgradation of refineries would ensure minimum production of furnace oil and maximum production of finished POL products on a par with the Euro V specifications.

The refineries say the sales tax exemption has nullified the incentive package of $1.65 billion offered through ESCROW account, leading to $1.152 billion loss due to impact of sales tax exemption. They argue, according to the official, this alteration has made their upgrade projects economically unsound and unsustainable. The shift from zero-rated status to exempt status for sales tax on MS, HSD, kerosene oil and LDO will increase the cost of upgrade project manifold.

The SIFC meeting, however, the official said, appreciated the endeavors of Petroleum Division, its team and 20-member task force, headed by Deputy Prime Minister Ishaq Dar, for finalizing and getting approved the consensus implementation framework from Ecnec to enforce amended E&P policy 2012, allowing the private sector to purchase 35 percent of gas from new gas discoveries at the auctioned prices.

However, to make JJVL LPG plant operational, Sui Southern said it was working on the new structure but it was not finalized yet. Since federal minister for petroleum was not part of the meeting, the SIFC has decided to defer his issue till December 31. “Likewise, the issues of Cenergyico Pk Limited on petroleum levy and supply of gas to the National Steel Complex have also been deferred by December 31, 2024.”