Refineries Urge Reversal of Petrol Levy Differential
Pakistan’s four major refineries have jointly urged the government to withdraw the revised petrol pricing mechanism at once. They warn that a Rs49.02 per litre petrol levy differential threatens their financial viability and could derail billions of rupees in planned modernisation.
Attock Refinery Limited, Cnergyico PK Limited, National Refinery Limited and Pakistan Refinery Limited sent a joint letter to the federal petroleum minister. The letter challenges changes introduced on October 31, 2026. It says the new formula undermines the economics of domestic refining.
How the petrol levy differential works
Under the revised formula, imported petrol is priced on actual or latest available Pakistan State Oil cargo costs. In contrast, premiums, incidental expenses and customs duty components for local refineries stay frozen at March 7, 2026 levels.
Refineries must then surrender the resulting Rs49.02 per litre difference as petroleum levy. They receive no matching adjustment to their ex-refinery prices. As a result, they say the formula ignores rising crude procurement, freight, insurance, financing and other costs.
The companies say regional tensions linked to the Iran-US war have already pushed up costs across the supply chain. In their view, a formula that freezes local components while import costs move freely makes domestic petrol production financially unviable.
Brownfield upgrades at risk, refineries say
The letter says the decision cuts against commitments under the Brownfield Refining Policy. That policy was designed to upgrade the country’s ageing refining infrastructure. The companies cite three clauses from their upgrade agreements.
Clause 7 protects fiscal incentives and implementation timelines during modernisation projects. Clause 8.1 provides an incremental deemed duty incentive on motor spirit. Clause 22.2 requires contractual amendments to be made in writing and signed by all parties.
The refineries say surrendering the differential would erode expected returns and threaten planned upgrades. They also complain that the latest decision arrived without industry consultation, unlike previous pricing changes.
Cabinet direction and levy notification differ
The companies point to a further discrepancy. They say the cabinet directed that pre-war pricing components be retained for 30 days. Yet the petroleum levy notification remains effective until further orders. That open-ended wording, they argue, creates investor uncertainty and could disrupt modernisation programmes.
They have asked for three steps. First, withdraw the March 7 pricing freeze and the levy differential. Second, restore the pricing formula in place before October 31. Third, seek corrective action by the Oil and Gas Regulatory Authority.
They have also sought an urgent meeting with the petroleum minister during the current week. Pakistan Arab Refinery Limited is expected to approach the government separately, according to sources.
What this means for fuel prices and supply
The dispute lands days after fuel prices were cut for consumers. Petrol Price Cut to Rs369.06 for November 4 gave motorists relief at the pump. The refineries say consumer relief should not come entirely at their expense. They reaffirmed their commitment to consumer protection, reliable fuel supplies and timely upgrades in the same letter.
The wider levy debate has also run through parliament. JI Says Fuel Relief Agreed, Levy Fight Goes On covered talks between the government and Jamaat-e-Islami over the petroleum levy. That dispute centred on relief for consumers; this one centres on the refineries that produce fuel at home.
For drivers, the short-term effect is limited. Pump prices follow the notified formula, and the latest cut stands. The longer-term question is supply. If local refineries cut output or delay upgrades, Pakistan would lean harder on imports.
In addition, the row tests the Brownfield policy itself. The policy promised stable incentives in return for upgrade spending. If refineries believe those promises can change without consultation, future investment becomes harder to secure.
Frequently asked questions
What is the petrol levy differential?
It is the Rs49.02 per litre gap between imported petrol priced on current Pakistan State Oil cargo costs and local refinery components frozen at March 7, 2026 levels. Refineries must surrender that gap as petroleum levy.
Which refineries signed the letter?
Attock Refinery Limited, Cnergyico PK Limited, National Refinery Limited and Pakistan Refinery Limited signed the joint letter to the federal petroleum minister.
What do the refineries want?
They want the March 7 pricing freeze and the levy differential withdrawn, the pre-October 31 formula restored, corrective action by the Oil and Gas Regulatory Authority, and an urgent meeting with the petroleum minister.
Does this change pump prices now?
No. The dispute concerns refinery economics and future supply, not the notified pump price. The November 4 petrol price cut stands unless the government issues a fresh notification.
Why does the Brownfield policy matter here?
The policy offers incentives for upgrading ageing refineries. The companies say the new formula contradicts fiscal protections in their upgrade agreements and threatens planned investment.
