The federal government has decided a temporary increase in the inland freight equalization margin (IFEM) by Rs. 2.5 per liter on petrol, diesel, kerosene, and light diesel oil. This measure aims to expedite $5-6 billion worth of refinery upgrade projects in Pakistan.
The additional funds generated from this increase will be directed into ESCROW accounts to finance these upgrades, with the adjustment set to remain in place until the next federal budget, according to a national daily report.
The Oil and Gas Regulatory Authority (OGRA) has been tasked with evaluating the impact of the IFEM increase. The Petroleum Division will prepare a summary for approval by the Economic Coordination Committee (ECC).
However, Parco has expressed opposition to the IFEM increase, describing it as an ad hoc solution. The company argues that the government should address the sales tax anomaly in the upcoming budget. Currently, refineries are unable to sign implementation agreements with OGRA due to a sales tax exemption on petroleum products introduced in the FY25 budget. This exemption has undermined a $1.65 billion incentive package and resulted in a $1.152 billion loss for the refineries.
Refineries contend that the changes in sales tax have rendered the upgrade projects financially unfeasible and unsustainable, calling for a more permanent solution to support the sector’s growth and modernization.
