Monitoring Report
The Oil Companies Advisory Council (OCAC) has requested the Prime Minister Shehbaz Sharif for an urgent intervention and implementation of the already agreed increase in the margins of Oil Marketing Companies (OMCs) on motor fuels.
In its letter dated 28th September, 2022, OCAC, an umbrella organisation of oil marketing companies (OMCs) and refineries, has requested the office of the Prime Minister for an urgent intervention and implementation of the increase in margins agreed by the government representatives in a meeting held on 2nd August 2022.
According to OCAC letter to PM, it was finally agreed and concluded to increase the margins on both motor gasoline and diesel to Rs 6 per liter from the existing Rs 3.68/liter in a meeting held on August 2nd 2022 under the Special Advisor to Prime Minister and Chairman Energy Task Force, Shahid Khaqan Abbasi wherein Secretary Petroleum, Chairman Oil and Gas Regulatory Authority (OGRA) and representatives of OMCs were also in attendance.
“This increase was agreed to be implemented either in one go or in phases commencing 1st September 2022”, said OCAC letter.
Advocating its case before the premier, OCAC pleaded that the OMCs have been engaged over the last few months with senior government stakeholders on revision in margins due to rapid currency devaluation resulting in substantial increase in cost and inflation and increase in banking charges on account of country risk and devaluation. Similarly, minimum turnover tax is penalising industry from 2018 and obliges OMCs to pay higher taxes than corporate tax. Moreover, the current OMC margin is no longer realistic-it has reduced to only 1.4 percent of selling price.
It is relevant to note that the dealer’s association had earlier threatened to go on strike if their margin is not increased and later the government implemented an immediate increase in the Dealer margin to Rs 7/liter effective from 1st August, 2022.
As per OCAC letter, the case for increase in the margins of OMCs has not been presented before the federal cabinet’s economic coordination committee (ECC) as of 26th September 2022. Similarly, this has been the first time in the history of the industry that margin increase for the Dealers and OMC has not happened in tandem while such a gap between OMCs and Dealers margin does not exist in other markets. An immediate increase is therefore required for the sustainability of the oil industry, said the OCAC letter.
