Cabinet has approved an increase in margins of Oil Marketing Companies (OMCs) and petroleum dealers effective from the forthcoming revision in oil prices.
At present, the oil industry margins are the lowest in the regional countries.
Increase in Margins
OMCs margins increased by 18 percent during 2013-2018 and 25 percent dealers margins on the sale of petrol. OMCs and dealers’ margins on the sale of petrol went up by 42 % and 27 % respectively.
During 2018-202`, OMCs and dealers’ margins on the sale of petrol witnessed a hike of 13% on each. In the meanwhile, the margins of OMCs and dealers increased by 13 % each on the sale of high-speed diesel.
Economic Coordination Committee (ECC) had also approved an increase in margins of Oil Marketing Companies (OMCs) with effect from forthcoming revision in oil prices.
According to the statement, the ECC discussed in detail and approved the proposal submitted by the Ministry of Energy for an increase of OMCs and Dealers’ margins for Motor Spirit (MS) and High-Speed Diesel (HSD) with effect from forthcoming revision in oil prices.
Petroleum dealers ended a strike on Thursday night after reaching an agreement on margins.
Earlier, the government had announced not to accept the illegitimate demands of petroleum dealers to increase margins.
In the background of revision of margins of petroleum products, multiple consultation sessions were held with Pakistan Petroleum Dealers Association led by Abdul Sami Khan Chairman Pakistan Dealer’s Association. Resultantly, the Dealers’ Association has called off its strike.
In a joint statement, the petroleum division said that all stakeholders appreciated the Petroleum Division’s proposal for the enhancement of 99 paisas in the existing margin of Petrol i.e., PKR 3.91/liter, and 83 paisas in the existing margin of HSD i.e., PKR 3.30/liter. The proposal for a 25% increase in the margin of dealers will cover all delays in the revision of margin in the past and would also help dealers in mitigating the impact of inflation.
Petroleum Division has assured that it will put all its endeavors to defend the said proposal of 25% increase in the existing margin before the Economic Coordination Committee of the Cabinet and the Federal Cabinet so that this historic relief to the Petroleum Dealers in the shape of sizeable enhancement in their margins becomes a reality.
All parties clearly understand that passing on the extra costs to the general public/ consumers of petroleum products is not viable. However, Petroleum Division assured the Dealers Association that after 6 months (during June 2022) margins will be readjusted according to the level of inflation prevalent at the time.
The Dealers Association suggested that in the subsequent adjustment (during June 2022) the margins may be fixed in percentage terms and Petroleum Division will put its best efforts to obtain approval of the competent forum, for revision of dealers’ margin up to 4.40 percent of the selling price excluding dealers’ margin.
While agreeing with the proposal of the Dealers Association in principle, the PD will make best efforts to get it approved through the Competent forum.
This arrangement of enhancing margin presently by 25% and subsequent readjustment after 6 months will ensure safety and security of the business of the Petroleum Dealers without passing the extra burden to the general public. Both parties agreed to work mutually for the betterment of the country.
In a statement, Energy Minister Hamad Azhar had said that some elements were pushing the government to increase the profit margin by Rs9 per liter on the sale of petroleum products.
He said ruled out accepting the demand of the Pakistan Petroleum Dealers Association (PPDA). PPDA has been observing strikes to press the government for a hike in margins.
He stated that government could not hike margins by Rs 9 per liter to appease a few OMCs. The government is aware of the problems of the owners of petrol pumps, the minister said.
He added that government would accept their legitimate demands.
The petroleum division has moved a summary to ECC to hike petroleum dealers’ margins. He said ECC would decide in the next meeting.
Petroleum Division has proposed ECC to approve an increase in margins of OMCs and dealers up to 25.20 %.
Petroleum Dealers Association secretary Nauman Butt had said did not accept their demands. He announced to continue the strike until government raises the margin to 6 %.
He alleged that the government had not honored the commitment to hike margins.
The supply of petroleum products remained suspended at some of the pumps operated by PSO, Hascol, Total, and Shell.
A spokesman of the Oil and Gas Regulatory Authority (OGRA) stated that the authority remains engaged with the oil industry. The authority also monitored continuous supplies through company-operated sites.
It ensured product availability through timely transportation.
The regulator also advised the OMCs to operate their depots round the clock. It further visited the site to enforce the decision of the government.
ECC to approve margins
Economic Coordination Committee (ECC) may approve an increase in OMCs and dealers’ margins up to 25.20 %.
PIDE has recommended increasing margins of 23.32 percent in petrol and high-speed diesel (HSD).
The existing margin of petrol will go up from the existing Rs2.97 per liter to Rs 3.68 per liter and high-speed diesel from Rs 2.97 to Rs 3.68 per liter for OMCs.
In the case of petroleum dealers, the Petroleum Division has recommended an increase of up to 25.20 percent for petrol and high-speed diesel.
The margin of petrol will jump up to Rs 4.90 per liter against the existing Rs 3.91 per liter. In the case of high-speed diesel (HSD), margins will go up from Rs 3.30 to Rs 4.13 per liter.
The petroleum division wants to implement this increase in the upcoming revision of oil prices.
It wants to place a cap of US 60-100 per barrel for a monthly and fortnightly average price.
Petroleum division moved a summary to ECC following a threat of petroleum dealers to go on strike from November 25,
Earlier, Petroleum dealers have demanded to approval margins of 6 % of the sale price of petroleum products. Petroleum dealers have warned against the closure of pumps due to low margins.
Energy Minister met the delegation of the Pakistan Petroleum Dealers Association (PPDA). Mr. Abdul Sami Khan had led the delegation on November 3, 2021, to discuss revision in petroleum dealers’ margins.
The Secretary Petroleum, Chairman QGRA, Member Oil OGRA, DG(Oil) attended the meeting.
Secretary Petroleum invited Chairman PPDA to highlight the issues faced by them. Chairman PPDA said petroleum dealers have been operating the petrol pumps with a meager margin.
Margins further deteriorated’ due to ongoing inflation, rupee devaluation, and lease. Franchise issues with OMCs, the rising cost of doing business also deteriorated margins.
The government fixed margins in absolute terms that increased (in paisas) based on CPI. Thus, the sustainable operation of pumps is no more viable.
He said it may lead to closures of pumps if petroleum dealers margins are not revised upward by at least 6% of the sale price.
PPDA stresses the Energy minister to enhance the margins during a meeting.
Minister for Energy acknowledged the issues the petroleum dealers had faced.
He stated government increased the margins in April 2021.
But, in view of inflation, the government is ready to review the same to address the concerns of the PPDA.
But, the authority to revise margins rests with the Cabinet, he said.
Therefore, he asked to finalize a proposal based on a certain benchmark/yardsticks.
For this purpose, he advised forming a committee. It will comprise members of, PPDA, Petroleum Division, and OGRA.
The committee will suggest proposals for revising dealers’ margins within 10 days. The government has engaged PIDE to conduct a study to revise OMCs and Dealers’ margins.
PIDE presented its findings to the Ministry.
However, it had advised to come up with a robust model of cost and revenue centers of OMCs and Dealers. It advised working out the level of best margins to ensure risk-adjusted returns.
PIDE is about to finalize its study, and findings to share with the Committee also. Resultantly, Chairman PPDA nominated the following members for the Committee.
They included Mr.Abdul Sami Khan, Mr.Malik Khuda Buksh, Mr.Khawaja Atif Ahmed, Mr.Irfan Elahi, Mr.Abdul Majid, Mr.Raja Waseern and Mr.Hamayun Khan.
The Secretary of Petroleum will lead the government side. Chairman OGRA, DG(Oil), and PIDE team head will assist him.
Committee will work day and night to resolve the issue of margins on a long-term basis. However, the outcome of the Committee will be converted into the summary for the ECC within 10 working days.
PPDA showed their trust in government assurance and expressed that in case of the inflexible attitude of the government, they reserve their right to choose the next steps.
