The nationwide strike was called off on Thursday as petroleum dealers reached an agreement with the federal government regarding a revision in their profit margin.
The government sat down for day-long negotiations with the dealers. The negotiations concluded with the decision that there will be a 99 paisas increase in the margin to Rs4.90 per litre from the existing Rs3.91.
Pakistan Petroleum Dealers Association (PPDA) Chairman Abdul Sami Khan represented the petroleum dealers while the government team comprised adviser of finance to the PM Shaukat Tarin, energy minister Hammad Azhar and petroleum secretary Arshad Mahmood.
A number of consultation sessions were held with the PPDA, in which key Oil Marketing Companies (OMCs), Oil Companies Advisory Council and other leading players participated.
Rather than accepting the demand of PPDA to increase the margin by six percent which would equate to approximately Rs5 per litre on petrol, the government agreed to increase it by 99 paisas per litre and 83 paisas per litre on high-speed diesel (HSD). The margin on HSD will also be increased to Rs4.13 per litre from the current Rs3.30.
Although the PPDA was not willing to move an inch from its demand, however, energy minister Azhar, made it clear that the illegitimate demand for a substantial increase in margin would not be accepted.
The minister stated, “Some elements are pushing the government to increase the profit margin by Rs9 per litre on the sale of petroleum products. He added, “The government cannot hike margins by Rs9 per litre to appease a few oil marketing companies”.
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 allows coverage of all the previous delays in the revision of margin and would also facilitate them in mitigating the impact of inflation.
The Petroleum Division has guaranteed that it will put all its endeavours to defend the proposal of the 25% increase in the existing margin before the ECC and the federal cabinet to make this historic relief to the petroleum dealers in the form of sizeable enhancement in their margins into a reality.
As per the agreement, all parties clearly understand that passing on the extra cost to the general public is not viable.
However, the division has given the assurance to PPDA that after six months (in June 2022), margins will be readjusted in accordance with the level of inflation prevalent at the time.
The association recommended 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.
On Thursday morning, panic buying was observed at petrol pumps across the country due to the announcement of the nationwide strike for an indefinite period by the PPDA. Long queues, brawls and traffic jams were reported at various petrol stations. However, towards the end of the day, things started to get back to normal as petrol pumps started opening.
The strike was not a complete success owing to the non-participation of the oil tankers associations, the opening of outlets operated by big OMCs, and the 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 the margins of OMCs and dealers.
The first option entails 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.
The second option has PIDE’s recommendation to revise the margins of petrol and HSD as a percentage of petroleum products prices excluding the margins.
In another option, PIDE has recommended to deregulate Pakistan downstream industry.
