ECC defers approving margins of OMCs, Weekly oil prices revision

The Economic Coordination Committee (ECC) has deferred approving increases in the margins of oil marketing companies (OMCs) and revising oil prices on a weekly basis.

Sources said that Miftah Ismail chairman ECC said that they would consider the agenda in the upcoming meeting.

The petroleum division had requested ECC to approve margins of ECC by Rs 5.70 per litre for OMCs and revision in oil prices on a weekly basis.

At present, government revises oil prices on a fortnightly basis and now was going to revise on weekly basis due to uncertainty in dollar rates.

Earlier, the government had agreed to increase the margin of Pakistan State Oil (PSO) to Rs 6 per litre due to a higher inflationary rate.

It has already increased the margins of dealers to Rs 7 per litre.

The petroleum division had moved a summary to the Economic Coordination Committee (ECC) of the cabinet to increase the margins of oil marketing companies (OMCs) and dealers by Rs 7 per litre.

ECC has increased margins for dealers to Rs 7 per litre. However, the economic decision-making body had not raised the margins of OMCs.Some officials said that the government may set OMCs margins at Rs 5.70 per litre.

Change in Exchange rate formula hits PSO margins

Moreover, the government had changed the formula for taking the exchange rate. Earlier, the government took the exchange rate on the last day of determining oil prices.

However, it had taken an average exchange rate of fifteen days to set the new prices from August 1, 2022, which had raised alarms for the oil marketing companies.

These companies had warned to go on strike as dealers had threatened to go on strike, forcing the government to increase margins.

In a recent meeting held between oil marketing companies (OMCs) and government officials, both sides reached an understanding to increase the PSO margins including other OMCs by Rs 6 per litre.

Oil Companies threaten to go on strike due to the capping dollar at Rs225

This increase in PSO margins will take effect after the economic coordination committee (ECC) approval.
During the meeting, oil marketing companies had also drawn attention to the revision in the exchange rate formula that led to losses for the oil industry.

The government has decided to change the pricing mechanism for petroleum products, shorten its period to account for the volatile currency exchange rate, and minimize losses for oil marketing companies (OMCs) and refineries.

The government has also committed to increasing OMCs’ margins on petroleum product sales with dealers, who have secured a 43% increase in margin on petrol and a 70% increase on high-speed diesel (HSD) to Rs6 per litre each with effect from August 1.

To compensate for the higher taxation impact, the OMCs have increased their demand for margins of Rs9 per litre.