Sunday November 27, 2022

High-earning OMCs’ margin hike demand dubbed unfair

August 20, 2022

KARKACHI: The oil marketing companies' (OMCs) demand for jacking up their margins on petroleum products at a time when their profits are surging exponentially on higher consumption is unfair and will push the local prices to new highs, sources said on Friday.

The government has agreed to enhance the margins to Rs6/litre each on petrol and diesel.

The raise in margins of OMCs was part of the summary of the Petroleum Division presented before the Economic Coordination Committee (ECC) of the Cabinet and put on hold for some time.

The Petroleum Division had proposed to raise OMCs margins to Rs6/litre on diesel and petrol from existing Rs3.68/litre on both the products.

The proposal of the Petroleum Division meant that the government had agreed to raise the margins and an approval was likely in a few days, a source told The News.

“However, this demand is unjustified as it would further burden the consumers, already paying high prices for fuels after inclusion of petroleum levy and higher dealers’ margin, which were made a part of prices in the last fortnightly revision,” a source said.

An industry official, quoting the summary of Petroleum Division, pointed out that OMCs, while pitching this demand, argued that higher interest rates, rising inflation, increased cost of LCs (letters of credit) etc were bringing their profitability down.

“However, in reality their profitability has surged manifold,” the official source said.

For instance, Attock Petroleum Limited (APL) has recorded a net profit of Rs7.29 billion in the last quarter (April-June) of 2021-22, up 5.8 times compared to the preceding month of the last year.

The half year financial results of Shell Pakistan Limited showed the company posted a profit after tax of Rs7.469 billion compared to Rs2.153 billion made in the same period last year.

Pakistan State Oil (PSO) posted a net profit of Rs64.7 billion in July-March 2021-22 compared to Rs18.2 billion in the same period last year, a jump of 255 percent, while the company is going to announce the financial results next week for the whole fiscal, which is expected to be on the higher side, sources said.

The diesel prices could have been reduced by Rs3.38/litre but the implementation of Rs7/litre dealers’ margins deprived the consumers of any relief in the form of reduction in price.