The author
Under the new Brownfield Refinery framework, consumers are again being required to bear deemed duty / tariff protection of up to 10% on both gasoline and HSD. This is a very significant commercial benefit for profit-making refinery businesses. Refineries do not operate on a no-profit-no-loss basis, nor are they public welfare entities. They are commercial undertakings expected to earn profits from efficient operations, better yields, prudent investment and market performance — not from open-ended consumer-funded protection.
The issue is not whether Pakistan’s refineries should be upgraded. They must be. The real question is: who pays, who gains, and whether the consumer receives any measurable benefit after paying for refinery modernisation.
In the past also, deemed duty has been collected from petroleum consumers since 2002. On a reasonable estimate, the cumulative collection may be around Rs700 billion, or approximately US$2.5 billion, which is already nearly 40–50% of the estimated US$6 billion refinery-upgradation programme now being pursued under the Brownfield Refinery Policy approved by the CCoE on 28 July 2026. The exact amount, however, can only be established through an authentic refinery-wise, product-wise and year-wise forensic audit.
There is another related concern. Consumers are being charged for Euro-V compliant gasoline and HSD, while the product supplied by some refineries may not be fully compliant with the complete Euro-V specification and may be compliant mainly in terms of sulphur content. If any quality differential has been collected from consumers, it must be transparently accounted for, adjusted in the pricing mechanism, credited to a properly audited public account, or passed back to consumers.
Apparently, the consumers are bound to continue paying full import-parity prices for locally refined MS/HSD even after refinery upgradation has been substantially financed at consumer cost. That creates a serious policy imbalance.
The concern is simple: consumers pay the cost, while refineries retain the upside. After upgradation, refineries will benefit from improved yields, higher MS/HSD output, lower furnace-oil production, better product quality, stronger marketability and improved margins. If these gains accrue entirely to refineries while consumers continue to pay both deemed duty and full import-parity prices, the policy risks converting an upgradation incentive into a perpetual consumer-funded rent.
If consumers are pre-financing refinery modernisation through deemed duty and costs, then post-upgradation pricing must pass a measurable domestic-refining benefit back to them. That benefit should at least be equal to, and arguably greater than, the deemed duty paid by consumers, because upgraded refineries will also enjoy enhanced yield, efficiency and margin benefits.
This consumer pass-through may take the form of a discount against import parity, automatic reduction or expiry of deemed duty after cost recovery, or a refinery-wise audited NRM-based benefit-sharing mechanism. Unfortunately, this aspect appears to be missing from the current Brownfield Refinery framework.
Deemed duty should not become a consumer-funded charity for commercial refinery businesses. If refineries require policy support for upgradation, that support must be transparent, time-bound, audited, strictly ring-fenced for approved upgradation expenditure, and linked to measurable consumer benefit. It should not operate as perpetual import-parity pricing plus consumer-funded deemed duty, where the cost is socialised but the upside remains privatised. ( Opinions expressed in this article are the author’s own and do not necessarily reflect the editorial policy of WNAM ).
The author is: Former Member (Gas), OGRA; Energy Law, Regulations, and Policy Advisor | Email: [email protected] | Cell: 0333-5191381
