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The Oil Companies Advisory Council (OCAC) has raised alarms over the government’s decision to impose new levies on furnace oil, cautioning that the move could drive prices up by more than 80% and cripple major industrial sectors. In a letter to authorities, OCAC Chairman Adil Khattak outlined the industry’s serious concerns about the economic fallout of these taxes.
According to OCAC, the Finance Act 2025 has introduced a hefty petroleum levy of Rs82,077 per metric ton alongside a Climate Support Levy of Rs2,665 per ton on furnace oil. These new levies on furnace oil, the council warned, will substantially increase production costs across critical industries and power generation.
Furnace oil is a deregulated commodity widely used by sectors such as cement, textiles, glass, tyre manufacturing, foundries, and shipping. OCAC highlighted that the sharp price surge would make furnace oil unaffordable for many businesses, pushing domestic demand to collapse. This, in turn, could lead to operational shutdowns in sectors that lack feasible alternative fuels.
Risk of Collapsing Demand and Forced Exports
OCAC further cautioned that if local consumption of furnace oil evaporates due to these new levies, refineries would be left with no choice but to export surplus supplies at a financial loss. Despite such exports, the government would still be liable to pay capacity charges under existing power agreements, burdening the economy further.
In addition, OCAC argued that the taxes run counter to the government’s stated goals of fostering industrial growth and could ultimately reduce overall tax revenue rather than boost it. The council urged policymakers to reconsider and swiftly withdraw the new levies on furnace oil to protect industrial output, safeguard refinery operations, and ensure stable power generation.
Industry experts echo these concerns, pointing out that soaring energy costs could derail competitiveness in the global market and deter future investment. As businesses brace for potential fallout, the debate over the economic viability of these taxes is expected to intensify.
OCAC’s warning underscores the delicate balance policymakers must strike between fiscal measures and sustaining industrial momentum in Pakistan’s already challenged economy.
