Oil Sector Demands 27% Hike in OMC Margins Amid Rising Cost Pressures

Pakistan’s oil sector has once again raised concerns over the financial sustainability of oil marketing operations, demanding a 27% increase in margins for Oil Marketing Companies (OMCs). The proposed revision would raise the current margin from Rs. 7.87 to Rs. 10 per litre, according to a detailed letter submitted by the Oil Companies Advisory Council (OCAC) to the Minister for Petroleum.

📉 Industry Says Current Margins Are Unsustainable

The OCAC emphasized that the present margin structure does not align with the actual operational and financial costs incurred by OMCs. The council reminded the government that back in June 2024, the industry had recommended an even higher margin of Rs. 12.65 per litre, citing various cost pressures such as:

• Financing for 20-day stock maintenance

• Turnover tax

• Handling losses

• Demurrage charges

• Unadjusted GST up to June 2024

• Other increasing operational expenditures

📉 Revised Demand After Consultations

Following extensive discussions with the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA), the industry revised its demand to Rs. 10 per litre, showing flexibility in hopes of achieving a workable solution. The revised proposal also seeks recovery of demurrage charges and unadjusted GST through the Inland Freight Equalisation Margin (IFEM).

While the Economic Coordination Committee (ECC) had already agreed in principle to allow GST recovery through IFEM, no progress was made on revising the OMC margin itself — a delay the OCAC warns could result in serious financial strain on oil companies.

⚠️ Call for Immediate Government Action

The OCAC has now urged the Petroleum Ministry to take immediate action and approve the revised margin structure, warning that failure to do so may jeopardize the financial viability of OMCs and threaten nationwide fuel supply stability.

Additionally, the council is pressing the government to ensure that the GST exemption mechanism is formally embedded in the upcoming Finance Bill 2025 to eliminate uncertainty and enhance clarity in taxation for the sector.

📦 Why This Matters for Pakistan

The demand for a revised margin isn’t just about profits—it concerns the long-term sustainability of the country’s entire downstream oil supply chain. With rising inflation, currency depreciation, and tighter global fuel markets, OMCs are struggling to absorb additional financial pressure without compromising operations.

Experts note that without urgent adjustments, Pakistan could face:

• Fuel shortages in critical areas

• Delays in fuel imports and inland logistics

• Increased risk of defaults in the energy supply chain

📌 Conclusion

With Pakistan’s fuel demand showing signs of recovery and global energy prices remaining volatile, proactive policy decisions are essential to ensure a stable and uninterrupted energy supply. The OCAC’s call for a Rs. 10 per litre OMC margin may prove to be a crucial step toward ensuring financial resilience in the sector.

The ball is now in the government’s court to decide whether it will prioritize the oil sector’s stability — or risk disruptions that could impact the country’s economy and daily life.