Rendering FO unaffordable for many

Business Recorder

20 hours ago

EDITORIAL: The Pakistan government's energy and taxation policies are proving to be a slow poison for many traditional industries. Their numbers are steadily declining, yet the government continues adding fuel to the fire. The latest example is the imposition of a petroleum levy (PL) and a climate support levy (CSL) on furnace oil (FO) totalling Rs 82,000 per ton, which accounts for over 60 percent of its cost. The outcome is predictable — domestic demand for FO is nearly dead.
It is, however, important to note that Pakistan's energy woes are not new. During the severe load-shedding days, particularly in the 2010s, industrial survival depended on captive power generation, with some industries relying on gas and others on FO. Subsequently, the government installed excess capacity at higher costs and is now forcing industries to consume electricity at expensive rates. Initially, gas prices increased to unaffordable levels — even exceeding the cost of imported RLNG. The objective was to shift industries from gas to the national grid. However, the new levies on FO are so high that even the most efficient combined-cycle plants find them unaffordable.
Many industries with tri-generation facilities quickly moved to FO, which was abundant, as refineries were seeking buyers. Now, with the levies imposed at prohibitive rates, industries must switch again. The brief period of cheap electricity has also ended. Life is becoming increasingly difficult, especially for companies without sufficient grid access or those requiring chillers to cool machines running on electricity. Industrial players are forced to incur additional costs while awaiting imports and infrastructure installation. 'They are killing industries,' lamented, for example, one textile player from southern Punjab.
The levies on FO also impact local oil refineries, as they now face a shortage of buyers for the FO they must produce. Exporting FO remains the only option, but it is challenging. Some refineries may be forced to reduce petrol and diesel production, increasing the import of refined petroleum products.
This issue is equally problematic for Sui gas marketing companies. High rates have eliminated industrial demand, yet the government remains committed to purchasing 9-10 cargoes of RLNG per month from Qatar. Limited usage and lack of storage mean domestic gas and oil production must be curtailed to accommodate imported gas.
The question is: Who benefits from this situation? Industries are suffering, while refineries and Sui marketing companies face existential threat. Ironically, many companies are choosing alternate energy sources rather than shifting entirely to the national grid. When ministers are confronted, they shift responsibility to the IMF (International Monetary Fund). Regarding gas prices, the conditions were included at the government's request. For FO, the levies are linked to IMF funding related to climate commitments.
The result is disastrous for energy-intensive industries, rendering them increasingly uncompetitive. Simultaneously, the government's national tariff policy is removing import duty protection that many industries previously enjoyed, revealing a lack of coherent policy. The government also appears unwilling or unable to negotiate effectively with the IMF, reflecting perhaps an underlying indifference toward the manufacturing sector. Unless this situation is remedied the share of industries would continue to shrink.
Copyright Business Recorder, 2025