ECC to approve Massive Increase in Margins of OMCs by over 63%
The Economic Coordination Committee (ECC) is set to increase the margins of OMCs by over 63% and deregulate the prices of petroleum products from November 1, 2022.
It will decide at its meeting this week.
The Petroleum Division has proposed an economic coordination committee (ECC) to raise the margin of oil marketing companies (OMCs) by over 63 percent following an increase in the cost of doing business in the country and a weekly revision in oil prices.
It also informed the Economic Coordination Committee (ECC) to deregulate oil prices effective from November 1, 2022.
The Petroleum division had proposed to increase margins of OMCs from Rs 3.68 per liter to Rs 6 per liter on petrol and high-speed diesel (HSD).
The summary was tabled in a recent meeting of the economic coordination committee (ECC) regarding the revision of oil marketing companies (OMCs) margins on petroleum products (petrol and high-speed diesel). It also proposed revising oil prices every week.
However, due to lack of time, the economic decision-making body had deferred it until the next meeting.
Following directives of the economic coordination committee (ECC), a meeting was held on August 2, 2022, to review OMC’s margins under the chair of MNA/Ex-Prime Minister, Mr. Shahid Khaqan Abbasi.
The meeting was also attended by the Secretary of Petroleum Division, Chairman OGRA, MD PSO, and representatives of other OMCs.
Earlier, the economic coordination committee (ECC) had considered the Petroleum Division’s summary on July 28 and approved dealers’ margins to Rs 7 per liter.
It had directed OGRA to review the OMC’s margins by August 10, 2022, in consultation with stakeholders.
ECC is also directed to present its recommendations for consideration by ECC so that it may conclude a decision on the margins before the price review is effective from September 1, 2022.
Oil Marketing Companies (OMCs) had demanded to raise their margins to Rs 8.85 per liter due to increased business costs.
They also stressed that turnover tax, high-interest rates, increased LC charges, demurrage, and increased costs on account of inflation have significantly reduced their profitability.
They also stated that the working capital requirements have increased because of high prices, making it difficult to continue their business.
The petroleum division had also suggested to the Economic Coordination Committee (ECC) that the meeting, led by former Prime Minister Shahid Khaqan Abbasi, recommend deregulating the prices of petroleum products beginning on November 1, 2022.
In consultation with the stakeholders, OGRA will conduct a thorough analysis of the effects of deregulating petroleum prices in the interim.
It will also focus on in-country freight equalization, dealer margin protection, and sales tax collection on dealer margins.
The recommendation of OGRA in this regard will be submitted to ECC for consideration not later than September 15, 2022.
Proposed Margins of OMCs
OMCs concurred that the government might fix their margins at Rs. 6 per liter during the interim period.
OGRA, the regulator, will monitor that Margins of OMCs have been accounted for in the ex-depot sales price.
They also agreed with the OMCs that the market would operate more smoothly in the interim period if the government did the price revision weekly rather than fortnightly.
The petroleum division stated that prices could go into effect every Saturday for petroleum products every Friday evening using the already approved mechanism.
During the recent meeting of the economic coordination committee (ECC), the ECC decided to take up the plan to increase OMCs margins in the upcoming session.
In addition to the Margins of OMCs hike, the petroleum division had proposed revision in oil prices every week following uncertainty in the exchange rate as the rupee had witnessed a free fall. Now, it had started coming down.
