Petrol pricing changes may cause refineries Rs49/litre loss
ISLAMABAD: The government’s latest changes to the pricing mechanism of Motor Spirit (MS/petrol) are likely to impose an estimated financial loss of Rs49 per litre on domestic refineries, raising serious concerns about the viability of multibillion-dollar refinery upgradation projects involving an estimated investment of USD5-6 billion. In a communication with government, Adil Khattak, Chief…
The government's recent modifications to the pricing structure for Motor Spirit (MS/petrol) may result in a significant Rs49 per litre financial loss for domestic refineries. This concerns Adil Khattak, Chief Executive Officer of Attock Refinery Limited (ARL), who warns that the decision to include pre-war premiums and incidentals in MS pricing will cost refineries approximately Rs35 per litre.
Additionally, diverting Rs14 per litre from customs duty recovery for reducing the Petroleum Levy raises the total adverse financial impact to Rs49 per litre. Khattak strongly believes the decision was made without consulting the refining industry, despite the sector previously making significant concessions to the government. He states that the latest move undermines the Brownfield Refineries Upgradation Policy, which was designed to fund upgradation projects through the depositing of customs duty proceeds into dedicated refinery accounts.
The ARL chief also highlights the policy's promise to protect refineries from adverse changes during the project execution period, emphasizing that such assurances are crucial for the financial viability and bankability of multibillion-dollar refinery investment projects. Khattak suggests that the sudden change in MS/petrol pricing on October 30, 2026, is a major setback for Pakistan's refining sector, which had been preparing for ambitious upgradation projects after years of policy uncertainty.
Four refineries signed their Upgradation Agreements in September 2026, with the fifth refinery, PARCO, expected to join shortly. The timing of the government's decision is particularly concerning, as refineries are currently negotiating with financial institutions to secure funding for these unprecedented investments. Khattak warns that the arbitrary change in the agreed financial framework after signing upgradation agreements raises questions about policy consistency, regulatory certainty, and the credibility of government commitments.
He questions the decision-making process, noting that neither the government nor the Petroleum Minister seemed to consult the industry that would bear the financial consequences.
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