ISLAMABAD: The Oil Companies Advisory Council (OCAC) has requested a 27% increase in the margin for oil marketing companies (OMCs), seeking a revision from Rs7.87 to Rs10 per litre to help the industry sustain operations amid growing financial challenges.
In a formal communication to the chairman of the Oil and Gas Regulatory Authority (OGRA), OCAC Secretary General Syed Nazir Abbas Zaidi urged immediate regulatory support for the long-delayed margin revision. The council also called for recovery of sales tax-related costs, citing them as essential for the sector’s financial sustainability.
According to OCAC, the industry has been operating under significant strain due to the absence of a margin adjustment since September 2023, alongside the burden of approximately Rs73.48 billion in unadjusted sales tax accumulated between April 2022 and June 2024. The continued exemption of sales tax on petroleum products, in effect since July 2024, has further eroded the financial viability of OMCs, with an estimated cost impact of Rs33 billion expected in FY2024-25.
Despite repeated appeals to relevant government bodies, these issues remain unresolved. The council noted that the rising cost base, without any recovery mechanism, is undermining the sector’s ability to invest in infrastructure, maintain operations, and meet regulatory obligations.
The OCAC also flagged persistent issues such as smuggling, high turnover tax, and mounting operational costs as further strains on industry margins. It stressed the urgency of aligning the margin structure with actual operating costs, a matter previously discussed with OGRA and the Petroleum Division.
As per OCAC’s revised proposal, the current margin structure—which includes a Rs3.01 per litre allocation for financing 20 days of stock cover—should be increased to Rs3.22 per litre, reflecting the average 1-month KIBOR of 21.9% from July 2023 to June 2024. Handling loss, presently accounted at Rs0.27 per litre, should be revised to Rs0.82, while operating expenses are proposed to increase from Rs2.92 to Rs4.09 per litre. This would raise the cumulative margin from Rs6.20 to Rs8.13 per litre.
Additionally, the OCAC recommended adjusting the gross profit percentage—calculated using CPI—as approved by the Economic Coordination Committee in September 2023. While the existing margin allows a gross profit of 27%, OCAC proposed fixing it at 23%, which would still result in a modest increase from Rs1.67 to Rs1.87 per litre.
The council emphasized that all cost components included in the revised margin are already part of the existing structure and reflect the real financial pressures faced by OMCs. It reiterated the need to recover the cost impact of the ongoing sales tax exemption, financing cost of previously unadjusted taxes, and demurrage charges via the Inland Freight Equalization Margin (IFEM), applicable to both OMCs and refineries.
