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Last amendment: CCoE extended the deadline for refineries to sign the Upgrade Agreement by six months following continued refinery objections; OGRA financial-guarantee timelines correspondingly extended. on 2024-05-15.
The policy is a domestic petroleum-products import-substitution instrument rather than a tariff or export-control measure. The headline lever is the deemed-duty mechanism: GoP retains a 7.5% notional duty inside the price build-up of locally-refined motor spirit and HSD, then channels that yield into refinery-specific escrow accounts maintained by OGRA. Refineries can draw from the escrow only against verifiable progress on Upgrade Agreement milestones, capped at 27.5% of total project cost. The remaining ~72.5% must come from the refineries' own balance sheets and project-finance arrangements.
Each of Pakistan's five brownfield refineries was required, within three months of policy notification (which fell on 16 November 2023), to (i) execute an Upgrade Agreement with the federal government, (ii) open the designated OGRA-administered escrow account, and (iii) post a Rs 1 billion bank guarantee to OGRA. Refineries that failed to sign would be ineligible for the incremental incentive.
The technical objective is to take Pakistan's refinery slate from largely hydroskimming / partial-conversion configurations (with HSD sulfur content materially above Euro-V) to deep-conversion units capable of producing Euro-V compliant motor spirit (≤10 ppm S) and HSD. The capex envelope announced by refineries totals ~USD 4.5-6 billion, depending on FX treatment and FEED-stage scope.
The 6 February 2024 amendments extended the deemed-duty horizon from the original 7-year window to 20 years (or until petroleum-product price deregulation, whichever comes first) — a material concession that addressed refineries' principal objection (that 7 years was insufficient to amortise the upgrade capex against deemed-duty escrow inflows). The same amendment package reduced the HSD deemed duty from 7.5% to 5% for refineries that refused to sign the Upgrade Agreement within one month of amendment notification, creating a sharper sign-up incentive.
A subsequent CCoE decision in May 2024 extended the Upgrade-Agreement signing deadline by a further six months after several refineries continued to raise concerns about FX-hedging mechanics and OGRA's pricing pass-through treatment.
short on diesel and motor spirit, importing the residual through PSO and private OMCs. A successful upgrade cycle that lifts domestic Euro-V capacity would compress finished-product import demand and shift the marginal import mix toward crude — improving headline trade balance composition even if total petroleum import value is broadly unchanged.
through ~2030 sits alongside the SIFC (Special Investment Facilitation Council) FDI architecture and the broader Petroleum Division upstream push. Execution risk is the principal binding constraint, not policy intent.
is contingent on price deregulation. If Pakistan does deregulate petroleum product prices within the policy horizon (a long-discussed reform), the deemed-duty floor collapses earlier than the stated 20-year envelope — changing the present-value calculation for refinery shareholders.
(licensors, EPC contractors, debottlenecking equipment imports). PKR weakness raises the local-currency cost of upgrades faster than the escrow-based recovery mechanism scales, which is one reason the timeline has slipped.
many of the five refineries actually executed UAs after the May 2024 deadline extension?
regime — does the deemed-duty floor convert into a transparent excise, or does it lapse?
tightened) under a future IMF program review, given the deemed-duty's implicit consumer-price burden.