ISLAMABAD:The federal government has moved to make the ECC-approved increase in oil marketing companies’ (OMCs) margins on motor spirit (MS) and high-speed diesel (HSD) conditional, advising the Oil and Gas Regulatory Authority (OGRA) to link the relief strictly with 100percent digitization of the downstream petroleum supply chain.
OGRA chairman, Masroor Khan, in a meeting held on 14th January 2026 to deliberate upon key industry issues and operational challenges being faced by OMCs, informed the industry that the federal cabinet has advised linkage of the entire margin increase with 100pc digitization. However, the industry has raised serious concerns regarding the non-notification of 50% of the ECC-approved the OMC margin increase of Rs 1.22 per litre for MS and HSD.
In a letter dated January 15, 2026, addressed to the Chairman of OGRA, the Oil Companies Advisory Council (OCAC), while reiterating the industry’s commitment to digitization, stated that it understands the Rs0.61 per litre margin increase was intended to take effect from December 15, 2025, with the remaining 50% linked to achievement of digitization targets.
OCAC, in this letter also raised that this revised linkage has effectively deferred implementation of even already approved immediate increase, thereby placing additional financial strain on OMCs. OMC continue to operate under a regulated margin framework that has remained stagnant for over two years and does not reflect escalating costs related to operations, financing, compliance, and mandatory digitization initiatives.
OCAC, in its said letter, has formally requested OGRA to plead the industry’s case, in coordination with MEPD (petroleum division) before the federal cabinet for immediate notification and incorporation of 50pc of the approved margin increase (Rs 0.61/litre) in the MS and HSD price structure, with effect from 15th December 2025, said OCAC letter.
To ensure timely transparent, and equitable recovery of digitization investment, OCAC has also proposed that a dedicated escrow-type account titled “Digitization Fund” be created as a separate line items in the MS and HSD price structure, similar to existing statutory levies (Petroleum Levy (PL) and the Climate Support Levy (CSL).
It is relevant to note that OGRA has finalized the digitization cost recovery mechanism, enabling OMCs to recoup expenses incurred in implementing digital systems mandated by the regulator. These systems are aimed at improving monitoring, inventory management, sales reporting, and regulatory oversight, thereby reducing inefficiencies and curbing malpractices in the downstream oil sector
Industry sources said the government’s directive aims to ensure that the long-pending margin increase—granted to address rising operational and compliance costs of OMCs—translates into structural reforms, particularly transparency, traceability, and real-time monitoring of fuel movement and sales across the country.
Under the approved framework, OMCs will be required to digitize key operational segments, including procurement, storage, transportation, and retail sales of MS and HSD. The margin enhancement will be implemented in phases, linked to verifiable progress on digitization benchmarks rather than extended upfront.
The OCAC, in its correspondence with the government and OGRA, had emphasized that digitization is essential to curb fuel smuggling, under-declaration, tax leakages, and unauthorized sales, while also improving inventory reconciliation and regulatory oversight. The government has endorsed this position by directing OGRA to strictly tie financial relief to reform delivery.
The industry sources also said the move reflects the government’s intent to balance industry sustainability with consumer and revenue protection. While acknowledging the financial pressures faced by OMCs, the authorities have made it clear that enhanced margins on MS and HSD will only be justified if the sector fully complies with digitization requirements.
Industry sources further said that the decision sends a strong signal that future regulatory relief in the petroleum sector will be performance-based, with digitization positioned as a non-negotiable reform rather than a voluntary initiative.
It is pertinent to mention that this development appears to mark a shift in downstream petroleum regulation, as the government pushes for technology-driven oversight to plug systemic inefficiencies while ensuring that ECC-approved incentives deliver measurable governance outcomes.
