Govt Unlikely to Increase Profit Margins for Oil Companies this Week

The government is unlikely to implement a promised increase in the margins of oil marketing companies (OMCs) this week because it lacks the capacity to implement new fiscal measures.

In a series of meetings with government officials, OMCs representatives urged for an increase in the margins the centre had promised months ago.

The first meeting was with Shahid Khaqan Abbasi, chairman of the Energy Task Force, and high-ranking officials from the Petroleum Division, while the second was with Tariq Bajwa, Special Assistant to the Prime Minister on Finance and Revenue.

The government set a margin of Rs. 5 per litre on petrol and diesel for OMCs and promised to raise it to Rs.6 per litre in the future. However, margins have not been raised in the past few months and oil companies sold approximately 10 billion litres of fuel during the same period.

During their first meeting with Petroleum Division officials, the OMCs were told that the government couldn’t help them because the matter was handled by the Finance Ministry.

OMCs then contacted Tariq Bajwa, who assured them that their case would be heard by Finance Minister Ishaq Dar, but cautioned that raising the margins was only possible if the government had some fiscal space, which currently isn’t the case.

Official sources have said the centre’s first priority is to collect Rs. 850 billion in petroleum levy to woo the International Monetary Fund (IMF). They stated that an increase in OMC margins was highly unlikely in the current scenario.

The government may not raise the margins in the next review of petroleum prices in the country this week, which would help to reduce the ex-refinery price for domestic consumers. Meanwhile, it may increase the petroleum levy on diesel in the coming review because the diesel price is declining on an ex-refinery (free-on-board) basis.

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