The federal government has decided to temporarily raise the inland freight equalization margin (IFEM) by Rs. 2.5 per liter on petrol, diesel, kerosene, and light diesel oil to fast-track the $5-6 billion refinery upgrade projects in Pakistan.
This increase will be redirected into ESCROW accounts, which will fund the upgrade projects. This adjustment is only a provisional measure until the next federal budget, reported a national daily.
The Oil and Gas Regulatory Authority (OGRA) has been tasked with assessing the impact of the IFEM increase, and a summary will be prepared by the Petroleum Division for approval by the Economic Coordination Committee (ECC).
Parco has opposed the IFEM increase by calling it an ad hoc solution. It said the government should address the sales tax anomaly through the upcoming budget since refineries are currently unable to sign implementation agreements with OGRA due to the sales tax exemption on petroleum products imposed in the FY25 budget. This exemption has undermined a $1.65 billion incentive package and led to a $1.152 billion loss for the refineries.
Refineries argue that the sales tax changes have made the projects financially unfeasible and unsustainable.