Oil industry urges OGRA to act on rs 73bn GST refunds, exchange losses and port bottlenecks

ISLAMABAD: Pakistan’s oil marketing companies have warned that unresolved financial claims, chronic supply-chain bottlenecks and regulatory delays are pushing the downstream sector into a severe liquidity crunch.

In a detailed letter to the Oil and Gas Regulatory Authority (OGRA) chairman, the the Oil Companies Advisory Council (OCAC) while conveying industry-wide concerns discussed during the ministerial meeting chaired on December 3 by the Federal Minister for Energy urged to take immediate action on long-pending issues.

 The minister had directed OGRA to work closely with the industry and resolve critical matters in a time-bound manner. OCAC’s latest communication outlines four major challenges that the industry says can no longer be delayed without risking market disruptions.

According to OCAC, the first and most pressing issue is the industry-wide GST refunds amounting to Rs 73 billion that remain stuck with the Federal Board of Revenue for the period from April 2022 to June 2024. According to OCAC, the prolonged non-payment has severely impacted liquidity in an already fragile financial environment. The industry also seeks a mechanism for settling GST claims accruing from July 2025, along with the recovery of costs linked to the sales tax exemption that took effect from July 2025. OCAC has further proposed that the financing costs incurred on unadjusted sales tax be settled at KIBOR plus two percent for both oil marketing companies and refineries, stressing that the delays have become unsustainable for several players.

The second major concern relates to exchange loss recovery. OCAC stated that the current mechanism fails to adequately compensate companies for losses arising from exchange rate volatility. The industry argues that the absence of a uniform, transparent and equitable formula creates distortions—particularly in pricing periods where no import settlements occur, leaving certain companies uncompensated despite bearing actual financial losses. The Energy Minister had reportedly instructed OGRA to verify the legitimacy of industry claims and finalize a standardized exchange loss formula that incorporates a clearly defined adjustment cycle.

Digitization efforts, especially Phase 3 of site-wise digitization, form the third major point of concern. While reaffirming its cooperation with OGRA, the industry cautioned that highly compressed timelines and the absence of a cost recovery mechanism have made implementation extremely challenging. Substantial expenditure has already been incurred, OCAC stated, urging OGRA to revisit the timelines and put in place a transparent mechanism for cost recovery before the full rollout continues.

The fourth issue pertains to port infrastructure constraints and the heavy demurrage charges that the oil industry has been forced to bear due to limitations at FOTCO. OCAC highlighted problems such as channel depth restrictions, limited night navigation and the unavailability of a dedicated MS pipeline, which have collectively created operational bottlenecks and inflated demurrage costs. OCAC has asked OGRA to coordinate with port authorities to implement structural improvements and incorporate verifiable demurrage charges into the industry’s cost recovery framework through IFEM.

OCAC has also urged OGRA to convene an urgent meeting with industry stakeholders to finalize timelines, methodologies and approval processes so that these longstanding matters can be resolved without further financial strain. The council said it remains committed to extending full cooperation to ensure that regulatory and operational issues are addressed promptly in the interest of the downstream oil sector and national energy security.