PSO Urges Zero Rating of Petroleum Products as Liquidity Pressure Mounts

Pakistan State Oil (PSO) has urged the federal government to zero rate jet fuel and petroleum products after persistent delay in sale tax refund trigger liquidity pressure, rising financing cost and operational challenges. The company warned that unless refunds are cleared and policy reforms are introduced and fuel supply operations nationwide could face disruption.

Sales Tax Refund Delays Deepen Liquidity Stress

In a letter to the Petroleum Division, PSO disclosed that outstanding sales tax refunds had climbed to Rs54 billion in FY25 despite repeated follow-ups with the Federal Board of Revenue (FBR). The delayed refunds have restricted cash flow making it increasingly difficult for the company to manage routine fuel supply operations efficiently.

Receivables Cross Rs732 Billion

As of March 2025 PSO’s total receivables reached Rs732 billion including Rs325 billion owed by Sui Northern Gas Pipelines Limited (SNGPL). Late payment surcharges are estimated at around Rs200 billion significantly adding to PSO’s financial burden.

While PSO noted that no new circular debt has accumulated since February 2024 following an understanding on monthly payment flows, the company stressed that blocked refunds and unpaid receivables continue to strain its financial position.

PSO Urges Zero-Rating of Petroleum Products

Due to the growing receivables, PSO Urges Zero Rating of Petroleum Products as Liquidity Pressure Mounts and it has become increasingly reliant on short-term borrowing, leading to higher financing costs. To stabilize cash flows and reduce borrowing, the company has requested immediate clearance of pending tax refunds and policy support to prevent future accumulation.

PSO specifically proposed shifting petroleum products and jet fuel to a zero-rated sales tax regime, stating that such a move would ease liquidity pressure and strengthen the company’s financial sustainability.

LNG Import Challenges Add to Financial Pressure

PSO also highlights challenges linked to liquefied natural gas (LNG) import under the government to government agreement with Qatar and The company said reluctance from the power sector to lift committed LNG cargoes forced it to arrange the diversion of 24 LNG shipments scheduled for 2026 adding further financial and operational strain.

Read also About : World Bank Backs Pakistan Gas sector Reforms

Retail Expansion and Improved Margins Offer Relief

Despite mounting pressures, PSO expressed confidence in its outlook. The company cited recent increases in petroleum margins and the expansion of its retail network, with 67 new outlets added across Pakistan and further expansion planned to support long-term stability.

Conclusion

PSO Urges Zero Rating of Petroleum Products as Liquidity Pressure Mounts which highlights serious cash flow challenges faced by Pakistan’s largest oil marketing company. Timely settlement of sales tax refunds, improved payment discipline and adoption of a zero-rated tax regime are crucial to reducing financial stress, ensuring uninterrupted fuel supply and strengthening Pakistan’s energy sector sustainability