The government’s decision to change the petrol pricing mechanism without prior consultation has raised serious concerns among Pakistan’s oil refineries, which have described the move as a major setback for the industry. Under the revised arrangement, refineries must deposit Rs49 per litre into the petroleum levy account to offset a Rs14.71-per-litre reduction in the petroleum levy. Industry officials say the decision shifts the financial burden of providing relief to consumers onto domestic refineries and could force them to sell petrol below production cost. The federal cabinet approved the change on Friday night. According to a Petroleum Division letter issued on October 30, the revised mechanism will remain in place for 30 days. Under the arrangement, the government will calculate the ex-refinery price of petrol by keeping the premium, incidentals and customs duty at their March 7, 2026 levels. Refineries must surrender the difference between the import price, calculated using Pakistan State Oil’s actual import costs, and the revised ex-refinery price into the petroleum levy account. Industry officials estimate that the mechanism will require refineries to surrender around Rs49 per litre, significantly more than the Rs14.71 reduction in the petroleum levy. They have questioned the rationale for imposing such a contribution and warned that it could push production costs above the price refineries receive. Refinery executives said the cabinet took the decision without consulting the industry. They also questioned the government’s earlier assurances that stakeholders would be consulted before changes to fuel pricing. Federal Minister for Petroleum Ali Pervaiz Malik had previously said that the government held discussions with refineries while defending a reduction in diesel prices. However, company officials said no consultation took place before the latest decision on petrol pricing. Gaza Ceasefire Two Palestinians killed in Israeli military operations The vice chairman of Cnergyico Pakistan warned that the intervention could push the company’s gross refining margins into negative territory. He said Cnergyico had been importing higher-priced crude oil from the United States, which produces a greater proportion of gasoline than the Middle Eastern crude grades the refinery traditionally processed. “We are bringing US crude, which is high-priced, and we are already not recovering the actual diesel crack because of the government’s intervention in restricting diesel cracks,” he said. He added that the revised petrol pricing formula could further damage the refinery’s economics because US crude yields more gasoline than the Middle Eastern grades previously used by the company. “With this change in the pricing formula, our gross refining margins can go into negative territory,” he said. Industry representatives said government interventions in diesel and petrol pricing were placing additional pressure on refinery profitability. They warned that the latest policy could also discourage refineries from diversifying crude oil imports, including purchases from the United States. The chief executive of another leading refinery criticised the government’s unpredictable regulatory approach, saying frequent policy changes could discourage foreign investment. “Nowhere in the world do policies change this quickly. The regulatory regime has become a joke and then the government expects foreign direct investment to flow into the country,” the executive said. He questioned how international investors could commit billions of dollars to Pakistan’s refining sector when the government could change pricing policies overnight without consultation. Attock Refinery Chief Executive Adil Khattak also described the latest change as a serious setback for the industry. He said refineries had already accepted limits on their high-speed diesel margins on two occasions, first at $41.89 and later at $38. Khattak said the government’s decision to use pre-war premiums and incidentals in motor spirit pricing would cost refineries around Rs35 per litre. He added that diverting another Rs14 per litre from customs duty recovery to reduce the petroleum levy would raise the total financial impact to Rs49 per litre. He also warned that the decision could undermine the Brownfield Refineries Up-gradation Policy. The policy requires 10 per cent customs duty proceeds to be deposited into dedicated refinery accounts to help finance upgrade projects. “Diverting these funds for other purposes defeats the objective of this provision,” Khattak said. He argued that the decision also weakened the policy’s assurance of protection against adverse changes during project implementation. Such assurances, he said, were essential to making multibillion-dollar refinery investments financially viable and attractive to investors. The industry has maintained that consumer relief should not come at the expense of domestic refineries. Executives warn that abrupt changes to the pricing framework could weaken existing operations, disrupt upgrade plans and further undermine investor confidence in Pakistan’s petroleum sector. Post navigation Government raises high-speed diesel rate by Rs2.29 per litre
