Federal cabinet has halted a proposed increase in fuel dealers’ commissions and oil marketing companies’ margins. It has linked approval to full digitisation of the petroleum supply chain.

The government is currently working to digitize the entire oil supply by tagging fuel pumps across the country.

Read More: ECC Approves OMCs, Dealers Margins

The Economic Coordination Committee had already approved increase in margins for a Rs2.56 per litre in retail margins on petrol and high-speed diesel

The federal cabinet, chaired by Prime Minister Shehbaz Sharif, has halted proposed increase in margins to link with a complete digitisation of the petroleum retail and distribution network.

The ECC had cleared a proposal earlier at a meeting on December 9, which was presided over by Finance Minister Muhammad Aurangzeb. The increase in margins was aimed at improving profitability for oil marketing companies and petroleum dealers amid rising operating costs.

Under the economic decision making body decision, an additional Rs2.56 per litre was to be added to petrol and diesel prices in two phases. The increase was made to adjust margins in line with the Consumer Price Index for fiscal years 2023-24 and 2024-25, while capping between 5% and 10%.

The ECC had also approved a Rs1.22 per litre increase for oil marketing companies and Rs1.34 per litre for petroleum dealers. It was split into two equal installments. The first tranche was scheduled to take effect in mid or late December by incorporating in the routine fortnightly price revision.

With the proposed increase in margins, oil marketing companies’ margins was supposed to rise from Rs7.87 to Rs8.48 per litre. The dealers’ commissions was supposed to increase from Rs8.64 to Rs9.31 per litre. The second tranche was planned for June 1, 2026.

However, the federal cabinet did not ratify the revised margins decision taken by ECC during the price reviews on December 15 and December 31.This was despite the fact that fuel prices were cut significantly due to lower international oil prices.

Officials said the prime minister had objected to the two-phased hike and argued that retail margins should only rise once the entire petroleum supply chain is digitized and monitored. The government plans for real-time visibility from import and production to final retail sale.

The cabinet has now effectively linked the ECC-approved margin increase to 100% digitization which is planned to be implemented only after June 1, 2026, subject to verification of progress by relevant authorities.

The oil companies advisory council, a body of oil industry has already raised question over digitization of retail network of oil, saying that it would require high cost.

The digitization will also help halting use of smuggled oil fuel in retail outlets. It will also help the regulator monitor the oil storages being maintained by fuel pumps.