ECC to approve hike in OMCs’ margins

Considers proposal to allow interim increase of 6.5% on sale of petroleum products

Zafar Bhutta March 09, 2021
Committee had recommended increase in margins of petrol and diesel by Rs0.19 per litre to Rs3 per litre each for OMCs. PHOTO: FILE


The Economic Coordination Committee (ECC) is likely to allow interim increase in margins of oil marketing companies (OMCs) by 6.5% on sale of petroleum products.

Earlier, the ECC had considered a proposal to hike margins of OMCs. However, it had constituted a committee to analyse and examine the margins historically before taking any decision.

The economic decision making body was informed that a study was not conducted by Pakistan Institute of Development Economics (PIDE) as the Oil and Gas Regulatory Authority (Ogra) and Planning Commission were not ready to bear the expenses.

In a recent report, the Petroleum Division had informed the ECC that the committee had proposed a hike in margins of OMCs and dealers of petroleum products on an interim basis as the study had not been conducted so far.

The ECC had approved the last revision in margins of OMCs and dealers on November 6, 2019 that became effective from December 1, 2019.

The committee had recommended that the government should give interim relief to the OMCs and dealers till the PIDE study is completed. The study is likely to conclude by June 2021.

The committee deliberated and proposed to revise the margins of OMCs and dealers up by 6.8% in line with available average core inflation (NFNE-Urban)of CPI (Base 2015-16) as published by the Pakistan Bureau of Statistics (PBS) for the period October 2019 to September 2020 (12 months).

The committee had recommended an increase in margins of petrol and diesel by Rs0.19 per litre from the existing Rs2.81 to Rs3 per litre each for OMCs. It also proposed a hike of Rs0.25 per litre on petrol and Rs0.21 per litre on diesel for dealers to Rs3.95 and Rs3.33 per litre, respectively. The current margin on petrol stands at Rs3.70 and high speed diesel Rs3.12 per litre. These margins have been proposed on interim basis till the completion of the study by PIDE.

Alleged claims against PSM

The Pakistan National Shipping Corporation’s (PNSC) vessel; M V Hyderabad, was arrested in South Africa on August 11, 2016 and another vessel ‘M V Chitral’ was arrested in Durban, South Africa on July 29, 2017 as the Pakistan Steel Mills (PSM) had failed to fulfill the contract for transportation of coal, which was signed between PSM and Coniston of Africa.

Hence, the South African government detained the two PNSC ships on grounds that both PNSC and PSM were the entities of the government of Pakistan. Consequently, PNSC had to pay Rs149 million on the direction of the ECC on account of guarantee fee and legal charges, which were required to be reimbursed to PNSC.

The ECC in February 2020 directed the Finance Division to allocate Rs149 million for reimbursement to PNSC. In response, the Finance Division advised that the Ministry of Maritime Affairs move a proposal for allocation of Rs149 million in the next financial year ie 2020-21, under its demand and agreed to pay the same.

In pursuance of the ECC’s decision for payment of Rs149 million to PNSC, the amount was allocated by the Finance Division in the budget 2020-21. Consequently, the maritime affairs ministry kept the amount in its own budget for reimbursement to PNSC in compliance with the ECC’s decision.

But during processing of the case, it was noticed that the Finance Division imposed financial cut, due to which only Rs139.315 million were released out of an allocated amount of Rs149 million as mentioned by the Finance Division.

Now, the maritime affairs ministry has sought payment of remaining amount of Rs9.685 million. The ECC has been requested to allocate supplementary grant to release the remaining amount to PNSC.

Supplementary grant for
low-cost housing units

The Ministry of Housing and Works has requested the ECC to allocate funds amounting to Rs1.5 billion through supplementary grant for low-cost housing units under the Prime Minister’s low-cost housing scheme.

The Finance Division was to provide funds amounting to Rs5 billion during financial year 2019-20 for the scheme through its authorised representative ‘Ministry of Housing & Works (Authority)’ that signed an Agreement with ‘Akhuwat Islamic Microfinance (AIM)’ to lend this amount to the deserving families in Pakistan for housing.

It was agreed that the government of Pakistan will provide Rs5 billion to AIM through the authority, but due to Covid 2019 only Rs3 billion could be disbursed to the borrowers and remaining amount Rs2 billion was surrendered last financial year 2019-20.

The Ministry of Housing and Works requested the Finance Division to provide surrendered amount of Rs2 billion in respect of ‘Prime Minister’s Low-Cost Housing Scheme’ for the 2020-21. The Finance Division allocated only Rs500 million instead of Rs2 billion surrendered funds, which has been released to AIM.

They have again been requested to please allocate remaining funds amounting to Rs1.5 billion so that the same could be released to AIM as per agreement for disbursement of interest-free loan to the borrowers under the prime minister’s scheme.

The Finance Division has conveyed their concurrence to make the necessary available for the Technical Supplementary Grant (TSG) to the Ministry of Housing and Works. In this regard, the approval of ECC has been sought by the federal cabinet.

Published in The Express Tribune, March 9th, 2021.

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