Oil marketing companies (OMCs) have approached the Oil & Gas Regulatory Authority (OGRA) to request an increase in their margins up to Rs 19.52 per litre for petrol and diesel, attributing the need to critical operational challenges and escalating financial pressures.
As per news reports, in a formal letter to the Chairperson of OGRA, the Oil Marketing Association of Pakistan (OMAP) stressed the regulated nature of the industry and the necessity for margins that reflect licensing conditions and operational realities, while ensuring reasonable returns to shareholders.
OMAP detailed several ongoing challenges that have pushed the petroleum sector to the brink, warning of potentially severe consequences if these issues remain unaddressed. According to the association, the cost of maintaining a 20-day stock is approximately Rs3.45 per litre, exacerbated by mandatory minimum stock requirements that add about Rs1.50 per litre.
The association further noted a significant increase in LC confirmation costs over the past year, which has surged by 6-10% for imports, adding an estimated Rs1.61 per litre to costs. This rise is based on a 60-day LC at an import value of Rs200 per litre, assuming half of the imports are affected.
Additional financial burdens include a turnover tax of 0.5%, contributing about Rs1.37 per litre to operational costs. Demurrage charges related to foreign exchange rate fluctuations also add approximately Rs0.5 per litre.
OMCs are also dealing with higher operating expenses across selling, marketing, and administration due to inflation, high energy costs, and increased utility expenses. These expenses amount to an estimated Rs5.65 per litre sold.
The financial strain is compounded by substantial funds tied up in IFEM, creating a liquidity crunch and incurring an extra cost of approximately Rs0.75 per litre. Delays in sales tax adjustments and increased handling costs add about Rs0.90 and Rs1.25 per litre sold, respectively.
To address these challenges, OMAP has proposed a revised OMC margin of Rs19.52 per litre, arguing that this adjustment is essential for the sustainability and operational efficiency of OMCs in Pakistan.
