The tale of the tortoise and the hare has long been a fixture in our collective memory, imparting the wisdom that persistence and steadiness can lead to success. However, with maturity, one learns that urgency and swift action have their own merits.

In economic planning, undue delays and over-caution can sometimes stall progress. This reality is keenly felt within the corridors of policy-making, where the cost of inaction often exceeds the risks of haste.

In Pakistan, the pace of policy development and implementation often suffers due to political instability, frequently reshuffling the leadership positions in key governmental roles. The regular turnover among crucial figures — such as the ministers of energy — disrupts continuity, leaving potentially transformative economic policies unexecuted.

Even when political stability is achieved, the policy-making process often gets hampered by unnecessary delays caused by bureaucratic red tape, legal complexities and the conflicting interests of various stakeholders.

Pakistan’s oil refining sector has languished without a major policy boost for three decades

This became apparent when the new oil refining policy was developed for existing facilities. Recently greenlit by the government, this policy incentivises crude oil refineries to modernise and expand their plants, paving the way for producing more eco-friendly, Euro-V-compliant fuels.

The projected investments from the local refineries — estimated between $5 billion and $6bn — can lift Pakistan’s petrol and diesel production capacities, nearly doubling petrol output and increasing diesel volumes by 47 per cent. Meanwhile, the production of low-value furnace oil could decline by 78pc.

The ripple effects of this development are unmistakeably beneficial. Primarily, it positions Pakistan to significantly reduce expensive fuel imports. In fact, there might not be any need to import diesel since the local demand could be met with domestic production. This could result in substantial foreign exchange savings.

Furthermore, the projected investment could stimulate job creation and business activity within the refining sector and its ancillary industries. This might offer a welcome boost to both skilled and unskilled labour markets. Importantly, by modernising and expanding oil refineries, Pakistan could fortify its energy security, safeguarding against the supply disruptions and price surges in refined petroleum products that have impacted the country in recent years.

While it’s tempting to laud the architects of the oil refining policy, a closer examination reveals a stark backdrop of prolonged inertia in policy-making. The oil refining sector — pivotal to the nation’s energy security — has languished without a supportive policy framework for an extended period.

It has been nearly three decades since the sector received a major policy boost, since the introduction of the 1997 petroleum policy. In present times, the global energy landscape has undergone profound changes, yet our policy framework has remained stagnant.

Consequently, the absence of fresh investment in the crucial oil refining sector is hardly surprising. Over the years, this stagnation has led to a decline in the sector’s vitality, with capacity utilisation rates dwindling around 50pc to 60pc.

Furthermore, despite eventually becoming a focal point for policy deliberation, the journey of the refining policy to fruition was marked by considerable delays. Initially dubbed the “Oil Refinery Policy 2021”, its title hints at an introduction planned three years before its actual notification.

The policy navigated through numerous bureaucratic layers, from the glass surfaces of Cabinet Committee on Energy’s desks to the polished cupboards of the Petroleum Division — its passage prolonged by political instability.

Additionally, industry insiders have pointed out that the Ministry of Finance (MoF) inadvertently became an obstacle during this critical period, complicating the policy’s introduction. This assertion gains weight from media reports indicating the MoF’s reluctance to endorse the policy’s proposed tax incentives, apparently due to concerns over potential shortfalls in tax revenues.

While such apprehensions might seem reasonable from a short-term standpoint, a broader, long-term view suggests the contrary. It’s reasonable to assume that the comprehensive development of the oil refining sector would, over time, contribute to an uptick in the state’s tax revenues, not a decline.

Besides, the MoF’s key role in passing the oil refining policy, traditionally under the purview of the Energy Ministry, might lead to concerns about whether policy development and specialised knowledge are properly aligned. In an ideal scenario, the organisations most equipped with knowledge and relevance should lead the policy-making process, with others contributing as non-primary stakeholders.

Adopting the oil refinery policy is a big step in the right direction, yet its journey was anything but straightforward.

The writer is a corporate consultant specialising in business and economic issues.

Email: sarfarazis@yahoo.com

X: @sa_cubes

Published in Dawn, The Business and Finance Weekly, March 25th, 2024