OMCs seek 100pc rise in margins on POL products

KARACHI: The oil sector has sought a 100 percent increase in the margins of oil marketing companies (OMCs) on petroleum products, citing a higher cost of doing business following a 20-year slump in diesel demand, The News learnt on Tuesday.

Oil industry representatives held a meeting with the Oil and Gas Regulatory Authority (OGRA) on Tuesday and presented the sector’s concerns and demands viz-a-viz the challenging business environment in the country.

OMCs told OGRA that the high cost of borrowing due to historic high interest rate and drop in the sales of petroleum products have been making their operations difficult.

OMCs are receiving Rs6 per litre margin on petroleum products and demanded the OGRA to jack it up to Rs12 per litre. “It is no longer feasible for OMCs to operate on low margins,” OGRA officials were informed.

The OMCs margins were last increased to Rs6 per litre from Rs3 and Rs3.68 per litre on petrol and HSD sales in November last year as demanded by the industry and conceded by former prime minister Shahid Khaqan Abbasi and Minister of State for Petroleum Musadik Malik. The anticipation was that the quality of petroleum products would improve.

OMCs said the oil industry was playing a critical role by ensuring uninterrupted fuel supplies across the country as well as generating significant revenues in the form of duties, taxes and levies. However, it faced “severe challenges” since last year because of the increased cost of doing business

They also raised the issue of smuggling, which according to them has been hurting the industry adversely. They told the meeting that diesel consumption slumped 2.5 million tonnes and petrol 1.5 million tonnes in the last fiscal because of smuggling of Iranian diesel and petrol in large quantities.

“On one hand, we have been grappling with the increased cost of business and rupee devaluation and on the other hand, the smuggling of petroleum products has pushed us to the wall,” the oil industry representatives said.

They demanded OGRA to take effective action against smuggling and proposed that it should direct the district administrations to at least take action against illegal outlets that were selling smuggled petroleum products in different parts of the country.

The exchange rate adjustment formula was also discussed in the meeting. OGRA was asked to establish policies that consider the interests of all stakeholders within the industry.

OGRA authorities assured the representatives of the oil industry that they would sympathetically consider the raised concerns of the sector.