No ‘take or pay’

The ‘take or pay’ clause imposed by the Oil and Gas Regulatory Authority (Ogra) is a recipe for disaster for Pakistan’s oil sector. Forcing oil marketing companies (OMCs) to purchase fixed fuel quotas from local refineries — or suffer penalties — is not just an unfair burden on an already struggling industry but a move that threatens to disrupt competition, strain supply chains, and drive up costs for consumers. If left unchallenged, this policy could further squeeze an economy already grappling with inflation and energy crises. While the intent behind this move may be to support local refineries and reduce reliance on imports, its practical consequences could be quite the opposite.

Smaller OMCs, unable to absorb the financial risks of rigid quotas, may scale down operations or exit the market altogether, reducing supply diversity and handing excessive control to a few dominant players. This lack of competition will likely diminish efficiency, distort fair pricing mechanisms, and ultimately lead to higher fuel prices for end users. Rather than coercive mandates, a well-balanced approach is needed. The government should focus on incentivising refinery modernisation, offering structured flexibility to OMCs, and implementing measures that ensure affordability and supply stability for consumers. Policies that force unsustainable obligations on businesses will only backfire, deepening economic instability instead of resolving it.

Majid Burfat

Karachi