Oil Industry Seeks Govt Intervention on Revised OMCs Margins

The Oil Marketing Association of Pakistan (OMAP) has urgently requested the Ministry of Energy to intervene regarding the revised margins for Oil Marketing Companies (OMCs) proposed by the Oil and Gas Regulatory Authority (OGRA).

In a letter to Secretary Petroleum Momin Agha, OMAP Chairman Tariq Wazir Ali stated that the proposed margin is significantly lower than the recommended level necessary for the healthy functioning of OMCs. Given the escalating cost of doing business, decreasing sales, pending sales tax refunds, FX losses adjustment, and rising operational expenses, the current margin structure does not adequately support the financial viability of OMCs.

Ali highlighted that this is particularly alarming in an industry where operational and logistical challenges already create thin margins. If the margin remains at the proposed level, it will severely impact the ability of OMCs to cover even basic operational requirements, let alone invest in critical areas such as infrastructure development, digital transformation, and safety protocols.

He emphasized that OGRA, as the custodian of this sector, should advocate for a margin that truly reflects the operational realities of OMCs. He urged that OGRA’s recommendations be based on a detailed and accurate depiction of the OMCs’ business landscape. A margin that does not account for the high cost of doing business will only result in diminishing returns for the entire sector, potentially leading to the closure of smaller OMCs and limiting competition.

Ali further noted that even established oil marketing companies (OMCs) have suggested a minimum increase in the OMC margin to Rs. 12.65 per liter, excluding the Rs. 2.50 per liter required for digitization. Meanwhile, emerging Oil Marketing Companies have suggested a minimum margin of Rs. 15.90 based on the financing costs of maintaining a 20-day stock cover, turnover tax, handling losses, demurrage, financing cost of unadjusted sales tax, and operating expenses incurred by OMCs.

However, OGRA’s recent recommendation of a mere Rs. 1.35 per liter increase, which includes Rs. 0.50 for digitization, is far below the minimum required level. Ali described this recommendation as almost farcical, as it fails to address the genuine financial challenges faced by OMCs and cannot even be regarded as a serious attempt to resolve the issue—amounting to little more than a mere eyewash.

In light of these concerns, OMAP recommends that OGRA reconsider the proposed margins and suggest a revision that aligns with current market dynamics. An appropriate margin must be implemented to ensure the survival of OMCs and their ability to continue providing reliable and efficient services across Pakistan.

“We trust that the Ministry of Energy (Petroleum Division) will stand with OMCs in this difficult time and take our concerns into serious consideration. We remain available for any further discussions and hope that our genuine demands will be addressed in an appropriate way,” the letter added.