ISLAMABAD:
The oil industry is now looking towards the apex court for withdrawal of the Sindh Infrastructure Development Cess, which may lead to the collapse of oil companies and refineries.
The Sindh government had imposed the cess on the import of petroleum products, creating financial challenges for the industry.
Officials of the Oil and Gas Regulatory Authority (Ogra) recently held a meeting with representatives of Pakistan State Oil (PSO) and the additional attorney general of Pakistan to discuss the issue. During the sitting, Ogra and PSO officials cautioned that oil marketing companies (OMCs) and refineries would collapse due to the Sindh infrastructure cess. They discussed the situation post-27th Constitutional Amendment, where PSO highlighted that all constitutional matters were in transition phase and should be submitted to the Federal Constitutional Court (FCC).
The meeting was informed that it may take three to six weeks once cases were submitted to the FCC. However, the additional attorney general and PSO counsel will expedite it on priority. The AAGP stated that since the federal government was not a party to the court petition, it was suggested that instead of bringing Ogra to the case, the federal government may be made a respondent.
PSO pointed out that currently the main issue was the submission of bank guarantee for which the Sindh government had verbally agreed to give relaxation till December 31, 2025 due to the Supreme Court’s interim relief order, which may be vacated or revised in the very first hearing. PSO and Ogra were of the view that the industry, as a whole, was facing significant operational and financial risks as a result of the change, including the import of crude oil for refineries. Weak margins and limited credit lines make it unfeasible for the industry to submit bank guarantee amounting to billions of rupees per cargo.
Responding to that concern, the AAGP said that he would discuss the matter with the legal counsel of PSO for fixing an early date for hearing the petition in the Supreme Court, prior to the expiry of deadline for the submission of bank guarantee, which is December 31, 2025.
The meeting concluded with the understanding that the AAGP, in consultation with the PSO legal counsel and Ogra, would make all efforts to fix the court case in the upcoming week for resolution of the matter. Earlier, oil cargoes had been stuck at Karachi Port due to a tussle between the oil industry and the Sindh government over the infrastructure cess. However, the Special Investment Facilitation Council (SIFC) intervened and Sindh agreed to extend the deadline for submitting bank guarantees. Sindh also released one oil cargo of PSO in October 2025.
However, oil crisis is still looming if the issue is not resolved as Sindh seeks to recover Rs180 billion in infrastructure cess from the industry. The province is also asking PSO and other OMCs to provide guarantee for cess payment before the release of more cargoes.
Sindh and the oil industry have been locked in the dispute since 2021. According to industry officials, the provincial government imposed the infrastructure cess on petroleum imports in 2021. However, the industry got a stay order from the Sindh High Court.
They said a two-member bench of the Sindh High Court later vacated the stay order and directed the industry to pay the cess. Oil companies then filed an appeal in the Supreme Court, but the apex court also directed the industry to pay the cess.
At that time, the then petroleum minister asked the industry to give an undertaking to Sindh that they would release the levy once the case was finally settled in court. Since 2023, the implementation of court’s decision had been pending. Now, Sindh has directed OMCs to pay the cess retroactively from 2021.
