Petroleum dealers threaten nationwide strike

Say got failed to increase profit margins for dealers as promised

KARACHI:

Petroleum dealers in Pakistan have issued a warning to close down filling stations across the country indefinitely, starting from Saturday morning. The decision comes after the outgoing government failed to honour its commitment of increasing their profit margins, leaving them dissatisfied with the current situation.

Speaking at a press conference held at the Karachi Press Club, Pakistan Petroleum Dealers Association (PPDA) Chairman Samiullah Khan expressed their frustration over the government’s inability to raise their profit margin to 5% on the sale of two major petroleum products. Currently fixed at Rs6 per litre (2.4%), the 5% margin would amount to over Rs12 per litre given the prevailing petrol and diesel prices of Rs253/litre and Rs253.50/litre, respectively.

A dealer later told The Express Tribune that Minister of State (Petroleum Division) Musadik Malik had reached out to the association’s chairman, pledging to hold a meeting with them in Karachi on Saturday.

However, if no meeting takes place or if there is no satisfactory outcome, the strike will continue, except on the two days of Muharram 9-10 (falling on July 28-29) to ensure that the religious event is not affected.

The latest fortnightly working for determining petroleum product prices, effective from July 16, indicated that the dealers were receiving Rs7/litre instead of the claimed Rs6/litre. However, this Rs7 margin falls significantly short of the 5% demand the dealers have been persistently making, a promise that was made by the government after assuming power in April 2022.

Malik Khuda Baksh, a member of the association, recalled that from 2002-2004, they were given profit margins in percentage terms, which proved beneficial as the margins adjusted with the changing fuel prices in the country.

The outgoing government had fixed the margin at Rs6/litre and assured the conversion to 5% later on. Despite the association’s repeated efforts to hold a meeting with Malik, they have faced indifference in response, further exacerbating their frustration.

The rising cost of doing business has offset the profit margins, leaving many dealers with negative margins. The delay in fulfilling the government’s promise has left the dealers in a precarious position, with the parliamentary term nearing its end. The fear is that they may remain in limbo for another three to six months during the caretaker setup and when the next elected government takes office.

Additionally, the presence of Iranian smuggled products, especially diesel, in local markets has created another challenge for dealers, leading to a reduction in sales by around 30%.
With current margins, it has become nearly impossible for filling stations to operate efficiently.

Khan highlighted that there are 12,000 filling stations nationwide, with around 10,000 of them being members of the association. He also pointed out the alarming inflation rate, reaching a six-decade high of 38% in May, with the annual average inflation rising to 29% in FY23 compared to 11% in FY22. Power and gas tariffs have increased, and the benchmark KIBOR for bank borrowing reached a new all-time high at 23%.

He further emphasised that the government had initially promised 5% margins in 1999, gradually reducing it to 4% by 2004, and eventually fixing it at Rs6 (2.4%) during its outgoing tenure.

The demand for petroleum oil products (POL) in Pakistan has plunged to a 17-year low of 16.61 million tonnes, marking a significant 27% year-on-year (YoY) decline in the fiscal year 2023.