ECC may approve upward revision in OMCs’ margin on petrol, HSD

Petroleum Division has proposed Rs0.45 per litre hike in OMCs' margin on MS and HSD

ISLAMABAD: The Petroleum Division has asked the federal cabinet’s Economic Coordination Committee (ECC) to approve an upward revision in margins on motor spirit (MS) and high-speed diesel (HSD) for oil marketing companies (OMCs) and dealers, it was learnt on Tuesday.

According to sources, the ECC meeting, scheduled to be held on Wednesday, is likely to give a go-ahead to the proposed increase in OMCs/dealers’ margins on petrol and diesel, as the division has sought the approval “without further delay”.

They informed that the Petroleum Division has proposed a Rs0.45 per litre hike in OMCs’ margin on MS and HSD. For dealers, a revision of Rs0.58 per litre has been sought on MS and Rs0.50 per litre on HSD.

The revision in the margins of OMCs and dealers has been worked out based on the Consumer Price Index (CPI) – from June 2019 to October 2020 — duly published by the Pakistan Bureau of Statistics. The ECC may also instruct the Pakistan Institute of Development Economics (PIDE) to initiate a study, to be funded through the Petroleum Division’s training fund, so as to evolve an effective policy on OMCs’ margins.

According to documents available with this scribe, the existing margin on MS and HSD for OMCs is Rs2.81 per litre, while dealers’ margins on the same are Rs3.70 per litre and Rs3.12 per litre, respectively. If the ECC grants approval to the proposed increase, the margin of OMCs on MS/HSD would be Rs3.26 per litre, while that of dealers would be Rs4.28 per litre on MS and Rs3.62 per litre on HSD.

On 6th November 2019, the ECC had approved a revision in margins of OMCs and dealers on the basis of average inflation, as recommended by Planning Division for the period from April 2018 to May 2019, i.e. 6.58pc effective from 1st December 2109.

The committee, in its decision, had also constituted a committee under the chairmanship of Special Assistant to Prime Minister on Petroleum Nadeem Babar, to revisit the existing mechanism for determination of margins for OMCs and dealers on MS/HSD in a holistic manner, and to devise a revised mechanism for purpose ensuring interests of all stakeholders, particularly the consumers.

Meanwhile, sources said the OMCs, during a meeting on 17th Sept 2020, had informed the SAPM that their margins were required to be revised, as per ECC’s mandate, in July of each fiscal year, but the same was still pending due to lack of a study on margins to be carried out by PIDE.

In addition, the Petrol Dealers Association, in a letter, had also requested the Petroleum Division that instead of delaying or denying the increase, it should continue with the inflation-based method until the PIDE study is completed.

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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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