The Oil Companies Advisory Council (OCAC) has urged the Oil and Gas Regulatory Authority (OGRA) to approve a 27 per cent increase in the profit margin for oil marketing companies (OMCs), raising it from the current Rs7.87 to Rs10 per litre.
The request, made through a formal letter, highlights the industry’s worsening financial condition due to rising operational costs and long-pending revisions.
OCAC Secretary General Syed Nazir Abbas Zaidi noted that OMCs have been under growing pressure since the last margin revision in September 2023. He stressed that the requested hike is crucial to help companies continue operations in the short term and meet regulatory requirements.
The OCAC also raised concerns over the non-recovery of sales tax-related costs. It pointed out that unadjusted sales tax dues of nearly Rs73.5 billion, accumulated between April 2022 and June 2024, remain unresolved.
Moreover, the continued exemption of sales tax on petroleum products has further worsened the industry’s financial outlook. The sales tax exemption, expected to persist into the next fiscal year, may add another Rs33 billion to the industry’s cost base in 2024–25.
The council warned that these challenges—coupled with ongoing issues like petroleum smuggling, high turnover tax, and insufficient margins—are damaging the sector’s ability to invest in infrastructure and maintain essential operations.
According to a revised cost proposal, OCAC suggested raising the financing cost margin on 20-day stock cover from Rs3.01 to Rs3.22 per litre, handling loss from Rs0.27 to Rs0.82, and operating expenses from Rs2.92 to Rs4.09. These adjustments would raise the base margin from Rs6.20 to Rs8.13 per litre.
Additionally, OCAC proposed fixing gross profit at 23 per cent—down from the current 27 per cent—based on inflation data. This would slightly increase the gross profit component from Rs1.67 to Rs1.87 per litre.
The proposed margin adjustments are based on Pakistan State Oil’s cost structure, previously approved by the Economic Coordination Committee in September 2023.
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