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Govt approves hike in margins of petrol, diesel sales.

ISLAMABAD -- A rise in profit margins of oil marketing companies (OMCs) and dealers of up to 10 percent on diesel and petrol sales starting July 1st has been approved by the government.

The petroleum division in a secret letter sent to Oil and Gas Regulatory Authority (Ogra) revealed a secret decision taken by the Economic Coordination Committee (EC) of the cabinet on May 30th had approved the rise in margins, reported Dawn.

This rise in margins would have to be added in the sale prices of petroleum products for July. Ogra has been informed margin for OMCs on high-speed diesel (HSD) has been increased by 23 paisa to Rs2.64 per litre compared to Rs2.41.

Also, dealer's margins were jacked up by 26 paisa per litre to Rs2.93 from the current Rs2.67 per litre.

Now, HSD would be half a rupee per litre more expensive due to the rise in margins.

Petroleum Division announced a rise of 9 paisa per litre for OMCs on petrol and 12 paisa for dealers which means margins for the former would increase up to Rs2.64 per litre from Rs2.55.

And dealers commission would increase to Rs3.47 per litre from Rs3.35 previously. Hence, the prices of petrol will see an inclusion of 21 paisa per litre in its price from next month.

Last year, the oil industry had been successful in getting a free reign from the previous government to decide diesel margins despite vociferous opposition from the industry regulator Oil and Gas Regulatory Authority (Ogra).

The Federal Board of Revenue's (FBR) inability to formulate a mechanism for general sales tax (GST) collection under a deregulated system, allowed the oil industry to get these margins revised in line with an old Consumer Price Index (CPI) based formula.

CPI levels from January 2015-April 2018 were taken as a reference by the petroleum division to propose high margins for the oil industry.

The petroleum division apprised the ECC that in its previous meeting held on October 6th, 2017 had given go-ahead to revisions in petrol margins of oil marketing companies (OMCs) and dealers based on CPI reading.

As a result, petrol margins were revised from November 1st, 2017 and diesel margins were deferred and recommended to be deregulated from 1st December 2017.

And its enactment was held back till the formulating of a GST recovery mechanism for the deregulated margins by the tax regulator.

In a letter written by Oil Companies Advisory Council (OCAC) dated 2nd March 2018 criticized the delay in deregulation of diesel margins because of its harmful impact on the oil industry.

The OMC's in their letters said due to non-revision of diesel margins in line with CPI-based formula, the industry had suffered a loss of Rs485 million from November 2017-February 2018.

It advised till the finalizing of the GST recovery mechanism, the diesel margins should be notified in line CPI-based formula.

Also, the petroleum division recommended dealer and OMC margins be also deregulated following the planned deregulation of diesel margins.

It proposed till finalization of the GST recovery mechanism, margins on petrol and diesel be reviewed based on CPI starting July 2018.

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Publication:Pakistan Today (Lahore, Pakistan)
Date:Jun 28, 2018
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