SIFC meeting discusses $6bn upgrade projects of local refineries

ISLAMABAD: In the meeting of SIFC held here on Wednesday, the way forward for $6 billion upgrade projects of local refineries was discussed after the refusal of IMF to government proposals.

Earlier, the IMF rejected the government proposals seeking restoration of zero-rated status and the imposition of 10 percent sales tax on POL products and asked the government to come up with new proposals.

“However, it has been decided in the SIFC meeting that the authorities may further engage the IMF functionaries till the approval of the budget for FY26 by parliament and persuade the Fund how important the upgradation of refineries is for the country. In case the government fails to persuade the IMF, then the government would re-change the brownfield refinery policy with more incentives, so that the vital upgrade projects would be initiated and completed on time,” a senior official who attended the meeting told The News.

The government has already given a temporary relief to refineries in the shape of hike in IFEM (inland freight equalization margin) by Rs1.87 per liter to cope with the Rs34 billion loss refineries braved in the outgoing year just because of the sales tax exemption on POL products—a measure introduced in the Finance Bill for FY25. This hike in IFEM will cope with the loss in 12 months till June 2026.

“IMF is also not conformable with the relief the government extended to the refineries through a hike in IFEM and it may not let the government extend this relief after June 2026,” the official said.

Refineries are of the view that their lenders will not extend financing till the government announces the resolution of the sales tax exemption once and for all at least for 6-7 years -- the time of up-gradation of refineries. Once the refineries are upgraded, the environment-friendly petrol, diesel and other POL products at par with Euro-V specification will be available in the country and the production of furnace oil will be minimized.