Karachi: In a significant development, the Cabinet Committee on Energy has approved amendments to the Pakistan Oil Refining Policy 2023, paving the way for long-delayed refinery upgrades. The amendments aim to remove obstacles that have hindered the execution of agreements since the policy's initial announcement in August 2023.

According to JS Global, the initial policy faced setbacks due to changes in the Finance Act 2024, which shifted major petroleum products from a zero-rated to an exempt sales tax regime, impacting project viability. While the Finance Act 2026 addressed some issues by exempting imported machinery from sales tax, the latest amendments provide the final clarity needed for refineries to move forward with upgrade agreements. The amendments also tackle the retrospective reduction of deemed duty on high-speed diesel from 7.5% to 5% for refineries that had not undertaken upgrades.

Key incentives of the policy include a 10% tariff protection on motor spirit and high-speed diesel for seven years, with incremental duties on these products to be used to finance upgrades. The amendments cap escrow account drawdowns and maintain deemed duty rates under specified conditions. The policy also offers sales tax exemptions on imported equipment and reimbursement of customs duty on imported crude.

This development is viewed positively for listed refineries, including Pakistan Refinery Limited, National Refinery Limited, and Attock Refinery Limited, as it enhances the prospects of increasing Euro-V compliant fuel production and improving product yields. Further details on the amendments are awaited.