OGRA refuses to support increase in margins of OMCs, dealers

Does not agree with decision of linking margins with CPI

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has opposed any increase in margins of oil marketing companies (OMCs) and dealers on sale of petroleum products.

The response from the regulator came after the Ministry of Petroleum and Natural Resources sent a summary for comments before submitting the paper to the Economic Coordination Committee (ECC) for approval, say officials aware of the development.





Ogra also did not agree with the increase in margins on petroleum products based on movement of the Consumer Price Index (CPI). “It is not right to link the rise in OMC and dealer margins with the CPI,” said an official while quoting the regulator.

The Ministry of Petroleum has called for pushing up the margins by 2.7%, which amounts to Rs0.06 per litre on petrol and high-speed diesel for the OMCs and Rs0.08 on petrol and Rs0.07 on diesel for the dealers.

If approved by the ECC, margins on petrol and diesel will rise from Rs2.35 to Rs2.41 per litre for the OMCs and will go up from Rs3.08 to Rs3.16 per litre on petrol and from Rs2.60 to Rs2.67 per litre on diesel for the dealers.

In a meeting held on October 29, 2014, the ECC had revised the margins, which came into effect from November 2014. For the OMCs, margins were raised by Rs0.12 and Rs0.49 on petrol and diesel, respectively. For dealers, these were increased by Rs0.30 for the two oil products.



The ECC had also agreed that margins would be linked with the CPI after an interval of one year.

OMCs were of the view that in line with the ECC’s decision margins should have been revised in November 2015 in sync with the CPI. They have sought higher margins compared to the CPI as another revision is expected this month.

They have proposed a rise of Rs0.10 per litre on petrol and diesel keeping in view the infrastructure investment they have made, which was not considered at the time of last revision.

On their part, dealers have requested for a revision in line with a report of the Pakistan Institute of Development Economics (PIDE), which estimated the margins at about 4-5% of the sale price. This amounted to Rs2.85 and Rs3.79 per litre on petrol and diesel respectively.

They have pointed out that PIDE’s recommendations were about two years’ old and their turnover was on the lower side, therefore, margins should be about 10% of the sale price.

The Ministry of Petroleum noted that expectations of the OMCs and dealers were beyond the rise in CPI but according to the ECC decision the proposed revision had been based on the price index from November 2014 to November 2015, which showed an increase of 2.7%.

Published in The Express Tribune, March 12^th, 2016.

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