OGRA proposes margin hike by Rs1.35 for OMCs, Rs1.40 for dealers

The Oil and Gas Regulatory Authority (OGRA) has proposed a margin increase on petrol and high-speed diesel (HSD) to Rs9.22 per liter for oil marketing companies (OMCs) and Rs10.04 for petroleum dealers. 

The move is aimed at supporting the digitization and automation of fuel pumps over the next three years. OMCs and petroleum dealers have long lobbied for these increases due to rising costs. 

As per the proposed changes, the margins for OMCs will be increased by Rs. 1.35 per liter, bringing the current margin on high-speed diesel (HSD) and petrol from Rs. 7.87 per liter to Rs. 9.22 per liter.

Additionally, as per the proposal, the margins for petrol pump dealers will see an increase of Rs. 1.40 per liter, raising their existing margin from Rs. 8.64 per liter to Rs. 10.04 per liter for both petrol and diesel.

The suggested increase is intended to account for rising operational expenses, as well as the costs associated with a new digitalization project for fuel stations. A margin of 50 paisa per liter has been allocated to OMCs, and 25 paisa per liter to petrol dealers to finance the digitalization process. This project aims to modernize fuel stations, improve transparency, enhance record-keeping, and ensure compliance with new Federal Board of Revenue (FBR) and Ministry of Energy regulations.

The digitalization initiative is part of the government’s broader efforts to bring greater transparency and efficiency to the fuel sector. Under the plan, OMCs will be responsible for ensuring that their dealers’ sites are fully digitalized. Monthly progress reports will need to be submitted to the regulatory authorities, including OGRA and FBR, detailing the progress made at each site.

If the proposal is approved, it is likely that the increase in margins will lead to a rise in fuel prices, affecting consumers already grappling with high energy costs. Currently, the margin on both petrol and diesel stands at Rs. 8.64 per liter, but the proposed revisions would introduce a significant increase.

Industry insiders are concerned about the potential effect on consumers, who may face higher fuel prices as OMCs and petrol pumps adjust to cover the additional costs. However, the modernization and digitalization of the sector are expected to bring long-term benefits in terms of improved service, accountability, and management of fuel distribution.

In a letter to the Secretary of the Petroleum Division, OGRA Chairman Masroor Khan emphasized the importance of the digitalization project for the modernization of Pakistan’s fuel sector. He pointed out that the proposed increase in margins is necessary to facilitate this transition and cover the associated costs. The final decision on the margin increase will rest with the federal government, and any changes to fuel prices will be communicated following government approval.

The proposal follows guidelines from the Economic Coordination Committee (ECC) and recommendations from Pakistan State Oil’s (PSO) operating cost analysis. The revised margins are expected to be implemented in phases, with the government deciding on the final structure of the increase.

While the proposal is still awaiting federal approval, industry experts and stakeholders are closely watching for the government’s final decision. The increase in margins, if implemented, could have wide-reaching effects on fuel prices and the operations of OMCs and petrol pump dealers across the country.