OCAC Calls for Increasing Margins, Recovery of Digitisation Cost
Oil Companies Advisory Council (OCAC) has expressed serious concerns over the regulator’s failure to implement the government’s decision to raise margins of oil companies and called for full recovery of investment on digitization.
In a letter to the Chairman OGRA, OCAC stated that it wishes to place on record the industry’s serious concern regarding the non-notification of 50% of the ECC-approved OMC margin increase of Rs. 1.22 per litre from MS and HSD. According to OCAC’s understanding, Rs. 0.61 per litre was intended to take effect from 15th December 2025, with the remaining 50% linked to achievement of digitization targets.
During the meeting held on 14th January 2026, the industry was informed by the regulator that the Federal Cabinet had advised linking the entire margin increase with 100% digitization. While the industry remains fully committed to digitization, this revised linkage has effectively deferred implementation of the already-approved immediate increase, placing additional financial strain on OMCs.
OMCs continue to operate under a regulated margin framework that has remained stagnant for over two years and does not reflect escalating costs related to operations, financing, compliance, and mandatory digitization initiatives.
Accordingly, OCAC formally requests OGRA to represent the industry’s case, in coordination with MEPD, before the Federal Cabinet for immediate notification and incorporation of 50% of the approved margin increase (Rs. 0.61 per litre) in the MS and HSD price structure, effective from 15th December 2025.
Digitization Cost Recovery – Escrow-Based Mechanism
OCAC stated that it has already shared the digitization cost recovery mechanism via OCAC letter No. OGRA/208 dated 12 January 2026. To ensure timely, transparent, and equitable recovery of digitization investments, it is proposed that a dedicated escrow-type account titled “Digitization Fund” be created as a separate line item in the MS and HSD price structure, similar to existing statutory levies (PL and CSL).
The proposed mechanism provides for milestone-based reimbursements, ensuring funds are released against verified implementation, including due compensation of significant investments already made by OMCs in digitization. Under this mechanism, OCAC proposed that the combined margin of Rs. 2.56 per litre for OMCs and dealers be included in the price structure as a separate line item, split equally between MS and HSD (i.e., Rs. 1.28 per litre each).
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OGRA and MEPD shall obtain requisite approval from the ECC for inclusion of this separate line item and exercise joint oversight over the operation of the fund. The account may be maintained as a savings account, with returns further supporting digitization initiatives.
Recommended Implementation Framework
The oil industry body called for immediate reimbursement (within 15 days of establishment of the mechanism) for both capital and operational costs.
This includes recovery of investment for ATGs already installed at retail outlets over past years and contributions made by OMCs towards the Raahguzar App, as well as contributions towards the Track-and-Trace System. OCAC also recommended setting an initial milestone of installing ATGs at 10 retail outlets per OMC, with reimbursement initiated within 15 days of receipt and verification of required documentation.
The council proposed that the mechanism continue until 2030, in line with digitization timelines submitted by OMCs, with extension beyond completion for maintenance and future technological upgrades.
In the event this mechanism is not adopted, OCAC proposes a structured and ring-fenced recovery through IFEM by incorporating the approved per-litre digitization cost into each OMC’s notified cost structure. Timely fortnightly recovery and reconciliation would need to be ensured by OGRA in such a case.
OCAC emphasized the critical importance of early finalization of these matters to ensure financial viability, regulatory compliance, and uninterrupted operations of OMCs, and remains available for further clarification or deliberation.