ISLAMABAD: The Economic Coordination Committee (ECC) that meets today (Wednesday) may witness a hot debate and division within ministries over the proposed increase in the commission of oil marketing companies (OMCs) by 23.32 percent and dealers 25.32 percent.
"And there are more chances that the ECC may not go for an increase in the margins as was promised by the Petroleum Division with the Petroleum Dealers Association," a senior official at the Energy Ministry said.
The Finance Division, in its comments on the summary of Petroleum Division for a hike in margins of OMCs and dealers, seen by The News, has opposed the raise in the margins of OMCs and dealers, arguing that it does not support the prior years’ adjustments at this point in time as this will increase the petroleum products prices.
The Petroleum Division on November 25 late night promised with dealers association to call off the countrywide strike and that it would fight the case in the ECC, asking for a raise by 99 paisas per liter in the dealers’ margin on petrol that currently stands at Rs3.91 per liter and 83 paisas in the existing margin on HSD, which is at Rs3.30 per liter.
The Petroleum Division had also promised further readjustment in margins after six months. The Petroleum Division would also, in the ECC meeting, ask for OMCs' margin increase by 23.32 percent on one liter of petrol and diesel, each to Rs3.68 per liter from the existing Rs2.97. And if the ECC takes the decision not to increase the margins of OMCs and commission of the dealers, then the country may again experience a strike by the Petroleum Dealers Association. The source said that the Finance Division wants to increase the petroleum levy by Rs4 per liter from the existing Rs9.62, coupled with an increase of general sales tax by 17 percent as has been dictated by the IMF.
The crude oil prices in the global market are on the decline because of an increase in oil production by the US and reduction in demand by South African countries in the wake of the spread of Omicron variant. More importantly, Russian companies have also indicated their willingness to increase the oil production, which will help reduce the crude oil prices in the international market in the days to come.
However, the government has made up its mind to raise the GST by 17 percent and petroleum levy by Rs4 per liter instead of passing on the impact of decrease in POL price in international market to end consumers. The government, according to the official, is of the view that an increase in the margins along with hike in petroleum levy and GST will be tantamount to double jeopardy for the masses.
The government is now bound to jack up the petroleum levy up to Rs30 per liter by increasing Rs4 every month to achieve the target of Rs356 billion by end of the current financial year.
The government is currently charging 10 percent customs duty (Rs9.74), petroleum levy of Rs9.62 and 1.43 percent (Rs 2.06) sales tax on one liter of petrol. And on per liter high speed diesel, it also charges 10 percent customs duty (Rs10.29) and 6.8 percent GST (Rs9.02) and petroleum levy of Rs9.14 per liter.
The Finance Ministry also says in its comments that the POL prices should remain at a reasonable level and the increase of 16 paisas per liter in the OMCs’ margins for motor gasoline (petrol), and diesel and 21 paisas and 18 paisas in dealers’ commission for petrol and diesel respectively decided in April 2021 by the ECC and ratified by the federal cabinet is enough and there is no need to increase it further.
The top official at the Energy Ministry says that if the ECC does not increase the margins of OMCs and dealers, then countrymen will again witness chaos and non-availability of the POL products across the country. The Petroleum Dealers Association on November 25 successfully demonstrated an effective strike across the country and as a result life came to a standstill.
The OMCs want to include in their margin other costs such as demurrages, turnover tax, and line fill in white oil pipeline and digitization, but the Finance Division in its comment said that all these need to be objectively reviewed by the Oil and Gas Regulatory Authority (OGRA).
