Govt gives in to petrol dealers’ demands

PPDA, govt team agree on increasing profit margin by up to 99 paisas

Our Correspondent November 25, 2021


The petroleum dealers on Thursday called off the nationwide strike after reaching an agreement with the federal government over revision in their profit margin.

In the day-long negotiations held between the dealers and the government team, it was decided that the margin on petrol will be increased by 99 paisas to Rs4.90 per litre from the existing Rs3.91.

The petroleum dealers were represented by Pakistan Petroleum Dealers Association (PPDA) Chairman Abdul Sami Khan while the government team included Adviser to the PM of Finance Shaukat Tarin, Energy Minister Hammad Azhar and Petroleum Secretary Dr Arshad Mahmood.

Multiple consultation sessions were held with the PPDA, which included participation of key Oil Marketing Companies (OMCs), Oil Companies Advisory Council and other leading players.

Instead of meeting the PPDA demand of six per cent margin – approximately Rs5 per litre on petrol, it was decided that the margin on petrol will be increased by 99 paisas per litre and 83 paisas per litre on high speed diesel (HSD). Similarly, the margin on HSD will be increased to Rs4.13 per litre from the current Rs3.30.

The PPDA was not ready to move an inch from its demand of six per cent increase in margin. Energy Minister Azhar, however, made it clear that the illegitimate demand for a substantial increase in margin would not be accepted.

“Some elements are pushing the government to increase the profit margin by Rs9 per litre on the sale of petroleum products,” the minister said in a statement. “The government cannot hike margins by Rs9 per litre to appease a few oil marketing companies,” he added.

“The government is aware of the problems of petrol pump owners,” the minister said, adding that their legitimate demands will be accepted.

A summary related to the increase in the profit margin of petroleum dealers, he said, had already been moved to the Economic Coordination Committee of the Cabinet (ECC) and it would decide the matter in its next meeting.

All stakeholders appreciated the Petroleum Division’s proposal of enhancing the existing petrol margin (Rs3.91 per litre) by 99 paisas.

The proposal for a 25% increase in the margin of dealers will cover all delays in the revision of margin in the past and would also help them in mitigating the impact of inflation.

The Petroleum Division has assured that it will put all its endeavours to defend the said proposal of the 25% increase in the existing margin before the ECC and the federal cabinet so that this historic relief to the petroleum dealers in the shape of sizeable enhancement in their margins becomes a reality.

According to the agreement, all parties clearly understand that passing on the extra cost to the general public/consumers of petroleum products is not viable.

However, the division assured the PPDA that after six months (in June 2022), margins will be readjusted according to the level of inflation prevalent at the time.

The dealers association suggested that in the subsequent adjustment, the margins may be fixed in percentage terms and the Petroleum Division will put its best efforts to obtain approval of the competent forum.

The arrangement of enhancing the margin by 25% and subsequent readjustment after six months will ensure safety and security of the business of the petroleum dealers without passing the extra burden on to the general public. Both parties agreed to work mutually for the betterment of the country, the agreement said.

On Thursday morning, panic buying was witnessed at different petrol pumps across the country on the nationwide strike call for an indefinite period by the PPDA. Long queues, brawls and traffic jams were reported at various petrol stations. However, by evening, things started to get back to normal as petrol pumps across the country started opening.

The strike was not a complete success due to non-participation of the oil tankers associations, opening of outlets operated by big OMCs and availability of CNG.

The summary moved by the Petroleum Division to the ECC for an increase in the margin of OMCs and petroleum dealers by up to 25.20 % is in line with the study approved by the Pakistan Institute of Development Economics.

The PIDE has proposed different options to raise margins of OMCs and dealers.

In the first option, PIDE has recommended that 50% of margins be linked to CPI and increase the margins based on CPI annually. The other 50% component of the margins should be revised every two years based on an analysis of data obtained from the petroleum dealers and OMCs.

Read: Govt rejects 'illegitimate demands' of petroleum dealers amid strike

The second option is to revise the margins of petrol and HSD as percentage of petroleum products prices excluding the margins.

In another option, PIDE has recommended to deregulate Pakistan downstream industry.


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