OCAC seeks Rs10 per litre OMC margin

KARACHI: The Oil Companies Advisory Council (OCAC) has recommended that a formula for determining the oil marketing company (OMC) margin be jointly developed by the Oil and Gas Regulatory Authority (Ogra), the Ministry of Energy (Petroleum Division), and the oil industry. It has also called for an upward revision of the OMC margin to Rs10 per litre for petroleum products.

In a letter addressed to the chairperson of Ogra, the OCAC sought immediate support for what it described as a long-overdue revision of OMC margins. “During a meeting held with the Minister for Petroleum on May 29, 2025, we were informed that the Economic Coordination Committee (ECC) has advised Ogra to develop a proposal for the revision of OMC margins,” the OCAC said. It added that the industry continues to face significant challenges, including smuggling, a high turnover tax, insufficient margins and rising cost pressures.

“Given these challenges, it is imperative that the OMC margin be aligned with actual costs, as proposed by the OCAC and discussed extensively with OGRA and the Petroleum Division,” the council said, reiterating its proposal for a Rs10 per litre margin.

The OCAC noted that the proposed margin is based on Pakistan State Oil’s (PSO) cost structure, as approved by the ECC in September 2023. All cost components included in the proposed margin are already part of the current margin. It explained that maintaining a 20-day stock cover is a licensing requirement, but doing so ties up capital and leads to financing costs. These costs have been incorporated into the margin, calculated using the average one-month Kibor rate (21.91 per cent) from July 2023 to June 2024.

Handling losses during storage and movement of motor fuels are already recovered through the margin. Operating expenses, a core element of the cost structure, have also been factored in to ensure fair cost recovery.

According to the Pakistan Bureau of Statistics, the Consumer Price Index (CPI) rose by 23.41 per cent in the July 2023-June 2024 period. As a result, a profit margin of 23 per cent has been included in the proposed calculation.

The OCAC has recommended that a formal formula for calculating the OMC margin be jointly developed by Ogra, the Petroleum Division, and the oil industry, and that future revisions should be carried out annually in July based on this formula.