Prime Minister Shehbaz Sharif has signed the Pakistan Oil Refining Policy, which has been circulated to various ministries and government departments for review before being sent to the Economic Coordination Committee (ECC) for approval.
This is another step toward the policy’s final approval to attract investments in the local refining sector with fresh inflows imminent from countries like Russia and Saudi Arabia.
According to the oil refining policy, all refiners are urged to upgrade for producing environmentally friendly fuel in accordance with Euro-V standards and to enhance the production of motor gasoline and diesel by reducing reliance on furnace oil.
Moreover, the fiscal regime of the policy states that from January 1, 2023, to December 31, 2028, there would be a customs duty of at least 10% on all grades of motor gasoline and diesel, as well as imports of any other finished products used for fuel for any type of motor or engine.
In addition, no customs duties/levies have been imposed on the import of any equipment to be installed or material to be used in the refinery, with no precondition for certification. The federal government is expected to make it possible for similar exemptions from provincial and local taxes.
When implemented, the oil refining policy is expected to create an environment conducive to the long-term sustainability of existing refineries and attract foreign investment in new projects. The upended rulebook will provide a high-functional fiscal and regulatory framework, as well as future policy structure visibility, to allow for investment in new refineries, and petrochemical and oil import terminals.
The policy also creates an enabling environment for large investments in a capital-intensive industry, as well as for the production and marketing of high-quality, environmentally friendly fuels.