OMAP Protests Sindh Cess Deduction Without Price Adjustment

Oil marketing firms warn 1.85% cess will disrupt fuel supply if not integrated into official pricing.

“We express our sincere appreciation for the Ministry of Energy (Petroleum Division)’s continued efforts toward maintaining stability and regulatory balance within the petroleum sector,” Tariq Wazir Ali Chairman OMAP said adding that however, through this letter, we wish to lodge a strong and urgent protest on behalf of all Oil Marketing Companies (OMCs) against the recent implementation of the Sindh Government Infrastructure Cess Tax of 1.85%, which has been enforced without its proper incorporation into the regulated pricing structure.

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This levy translates to an additional burden of approximately PKR 2.5 to PKR 3 per liter, directly eroding the already thin margins of OMCs and threatening their operational viability.

It is imperative to emphasize that OMCs operate in a fully regulated environment, wherein product pricing, margins, and all cost elements are determined strictly under the prescribed formula.

Therefore, OMCs have no legal or operational discretion to absorb any additional cost or deduction beyond the approved price formula. The recent move to impose or deduct 1.85% of the Sindh Cess from OMCs’ import volumes is neither tenable under law nor consistent with the established regulatory mechanism.

OMCs are already functioning under an extremely thin and insufficient profit margin that barely allows operational sustainability. The deduction of an additional 1.85% from such limited margins will make businesses viability impossible, leading to supply bottlenecks and system disruptions. This situation defies the very objective of the regulatory framework, which is to ensure fair return and uninterrupted petroleum supply.

Since petroleum products are regulated items and their prices are determined by the government, any levy, Cess, or tax imposed by a provincial or federal authority must first be incorporated into the pricing formula. Unless this 1.85% Cess is integrated within the regulated price mechanism by OGRA, the implementation of this deduction cannot and must not be applied to OMCs.

In view of the above, we make a strong legal plea that the Ministry of Energy, Petroleum Division, being the competent body, should immediately halt implementation of this decision until this Cess is duly reflected in the government-notified price structure. Any premature implementation would be in violation of the Petroleum (Marketing) Rules, OGRA Ordinance, and established pricing principles.

“We therefore request your urgent intervention and direction to suspend any such deduction or adjustment until the matter is legally reviewed and appropriately resolved through inclusion in the official pricing formula.

Failure to address this issue will undermine investor and operator confidence in the regulated petroleum sector,” Tariq Wazir Ali said.