Pakistan’s plan to modernize domestic oil refineries with billions in investment faces major uncertainty due to IMF-imposed conditions.
Sources say the IMF has demanded an 18% sales tax on petroleum products and denied tax concessions on imported machinery.
Officials say these conditions have raised serious doubts about the project, vital for improving fuel quality and reducing import dependence.
The government has warned that accepting the IMF’s additional 2% sales tax on petroleum could make fuel unaffordable for consumers.
Sources suggest petrol prices could increase by Rs47.50 per liter, while diesel could rise by over Rs50 per liter, affecting inflation and living costs.
The IMF has reportedly linked the sales tax condition to a 72% investment return for refinery upgrades, complicating cost recovery and pricing.
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Officials maintain these demands undermine the financial viability of domestic refinery upgrades, as no refinery in Pakistan currently produces Euro V standard fuel.
Presently, local refineries produce only Euro II and Euro III category petrol and diesel, which fall below modern environmental standards.
Pakistan needs an estimated $6 billion to upgrade refineries to international standards, but IMF refusal for tax-free machinery imports complicates progress.
Officials say the lack of advanced refining facilities has resulted in diesel containing harmful sulphur, worsening air pollution and health risks.
Due to limited refining capacity, Pakistan imports 70% of petrol and 30% of diesel, totaling about 20,000 and 18,000 metric tons daily.
Sources note that currency depreciation and taxes on imported fuel raise domestic prices, leaving Pakistan exposed to external shocks and rising energy costs.
