The government’s plan to upgrade its refineries to produce high-quality fuel is at risk after the IMF refused to allow tax exemptions on imported machinery.
If the IMF’s demand for an 18% tax on petroleum products is accepted, petrol prices could rise by Rs47 per litre.
According to sources in the Ministry of Petroleum, the IMF has made the 18% tax on petroleum products a condition for cost recovery.
The government has proposed implementing a sales tax of up to 2% on petroleum products, but the IMF has yet to approve this suggestion. If the IMF’s demand is accepted, the 18% tax would increase petrol prices by Rs 47 per litre, while applying sales tax on diesel could raise its price by Rs 50 per litre.
The government has requested tax exemptions on machinery required for refinery upgrades. Currently, no refinery in Pakistan produces Euro 5-standard fuel; local refineries can only refine petrol and diesel up to Euro 2 and Euro 3 standards. Under the refinery upgradation plan, refineries are expected to invest $6 billion.
