OCAC Demands 27% Increase in Petrol Companies’ Margins

The Oil Companies Advisory Council (OCAC) has formally requested the Oil and Gas Regulatory Authority (OGRA) to raise the oil marketing companies’ (OMCs) margin by 27 percent, from Rs. 7.87 to Rs. 10 per litre. In a letter to the OGRA chairman, OCAC urged the need for immediate revision of the margin and recovery of sales tax-related costs. It said the margin has not been revised since September 2023; approximately Rs. 73.48 billion in sales tax remains unadjusted between April 2022 and June 2024, and the sales tax exemption on petroleum products continues to impact the sector adversely. The exemption alone is projected to increase the industry’s cost base by Rs. 33 billion in FY25. These financial burdens are making it increasingly difficult for OMCs to maintain operations or invest in infrastructure. According to the revised proposal, OCAC has calculated that the current Rs. 6.20 per litre margin must be raised to Rs. 8.13 per litre to align with actual costs. This includes increases in stock financing costs from Rs. 3.01 to Rs. 3.22 per litre, handling losses from Rs. 0.27 to Rs. 0.82 per litre, and operating expenses from Rs. 2.92 to Rs. 4.09 per litre. Additionally, the gross profit should be adjusted to Rs. 1.87 per litre at a revised 23 percent rate. OCAC also requested the recovery of costs related to the sales tax exemption beginning July 2024, the financing costs of unadjusted sales tax from April 2022 to June 2024, and demurrage costs through the Inland Freight Equalization Margin (IFEM) for both OMCs and refineries.