Govt to penalise refineries missing Oct 1 upgrade agreement deadline

According to Profit, which cited Business Recorder, the federal cabinet has approved financial penalties for oil refineries that do not sign upgradation agreements with the Petroleum Division by October 1, 2026. Under the revised framework, such refineries must pay deemed duty above 5% on high-speed diesel into a Refinery Upgradation Account by June 30, 2027. Refineries that sign by the deadline will see that duty cut to 2.5%, reaching nil by November 15, 2026.

The cabinet ratified amendments to the 2023 policy for upgrading brownfield refineries, moving agreement signing and oversight from OGRA to the Petroleum Division. The signing window shrinks to 45 days from 60. Projects get five years to finish, after which a one-year cure period applies with incentives cut by 1%. Units not commissioned in that window could lose their licences, while projects finished within three years earn an extra incentive for each year saved.

The Petroleum Division said the upgrades could save about $1 billion in foreign exchange a year and unlock roughly $6 billion in investment. However, a senior refinery executive noted the amendments have not yet been formally notified, while PARCO, PRL, NRL, Cnergyico and ARL reaffirmed readiness to sign after meeting the Petroleum Minister on August 26.