KARACHI: In view of the high cost of doing business, which has created financial difficulties, Pakistan’s Oil Marketing Companies (OMCs) have demanded a margin of Rs 12 per liter on high speed diesel (HSD) and petrol, JEE News reported on Thursday.
During the latest petroleum price review on April 30, OMCs’ margin on HSD was Rs 6.50 per liter compared to Rs 6 per liter on petrol. Apart from OMCs’ margin, dealers are charging a margin of Rs 7 per liter on both these petroleum products.
The demand from the oil industry to increase the margin of OMCs on HSD and petrol was made in a letter to the Secretary, Ministry of Energy – Petroleum Division.
“To maintain feasibility and ensure survival of OMCs, we propose that the margin of OMCs for HSD and Mogas (petrol) be fixed at Rs 12 per liter which is less than 6% of the existing ex-refinery price. is,” the Oil Companies Advisory Council (OCAC) – the umbrella body of OMCs and refineries – said in the letter.
OCAC pointed out that the oil industry plays an important role in the country by ensuring uninterrupted supply of fuel across the country as well as generating significant revenue in the form of duties, taxes and levies.
However, the oil industry has been facing serious challenges since last year due to the increase in the cost of doing business.
Reasons range from rising fuel prices and exchange rates in the international market to rising interest rates (which lead to inventory holding costs of around Rs 3 per litre), letter of credit confirmation charges, higher demurrages, and higher turnover tax ( 0.5%) etc. are varied.
The oil body pointed out that based on the decision of the Economic Coordination Committee (ECC) on October 31, 2022, the margin for diesel and petrol has been reduced to Rs 6 per liter during the current year. However, the same is insufficient and needs urgent revision.
It said that the OMC business needs continuous investment in infrastructure along with digitization of the fuel supply chain.
The OCAC letter pointed out that this was not possible at present as the industry faced inadequate margins, delays in recovery of foreign exchange losses, continuous fluctuations in the rupee, increased financing costs, challenges in verifying letters of credit, Limited by high turnover tax, and many others. Other factors which have been repeatedly communicated to the concerned constituencies.
The body called for immediate review and implementation of upward revision in margins to ensure continued viability of the oil marketing sector.
The pricing mechanism for diesel and petrol includes ex-refinery prices with OMCs and dealer margins and domestic freight equalization margins. Government tax in the form of petroleum levy is also a part of this price.
