The Oil Marketing Association of Pakistan (OMAP) has called for urgent policy reforms to address mounting financial and operational pressures on oil marketing companies (OMCs), warning that the current Price Differential Claims (PDC) mechanism could trigger serious fuel supply disruptions if not addressed promptly.
In separate communications sent to Federal Minister for Energy Sardar Awais Ahmad Laghari and the Chairman of the Oil and Gas Regulatory Authority, OMAP Chairman Tariq Wazir Ali described the situation in the downstream petroleum sector as “increasingly unsustainable.”
While acknowledging the government’s efforts to maintain price stability and market discipline amid a challenging regional environment — particularly in light of ongoing tensions involving the United States, Israel, and Iran — the association said these measures have helped safeguard the national economy and ensure energy availability.
However, OMAP stressed that the current structure and administration of PDC are placing an excessive financial burden on OMCs. The association noted that PDC levels have reached around Rs78 per litre on petrol and Rs176 per litre on diesel, significantly eroding margins and effectively turning OMCs into financial intermediaries for price stabilization without adequate support mechanisms.
Frequent and unpredictable weekly price adjustments have further worsened the situation, making financial planning, inventory management, and pricing strategies increasingly difficult. OMAP recommended reverting to a more predictable pricing cycle and ensuring the timely reimbursement of claims to reduce uncertainty.
The association also highlighted severe cash flow constraints, noting that companies are required to settle PDC obligations within very short timeframes, often within a week. In a high-interest-rate environment with limited banking support, arranging such liquidity has become both costly and, in some cases, unfeasible.
The situation is particularly critical for small and emerging OMCs, many of which face the risk of operational shutdown. This could reduce competition, create supply bottlenecks, and impact fuel availability across the country.
OMAP further raised concerns over regulatory and enforcement challenges, stating that the involvement of multiple agencies in operational matters has created uncertainty and disrupted smooth business operations. It emphasized the need for a clear jurisdictional framework to avoid duplication and ensure effective compliance.
Highlighting broader implications, the association warned of an increased risk of fuel shortages, financial stress across the sector, reduced investment in the downstream industry, and potential negative impacts on agriculture and the wider economy, especially during peak demand periods.
To address these challenges, OMAP proposed several measures, including the establishment of a centralized PDC management system through the State Bank of Pakistan, extending payment timelines to up to 15 days, facilitating low-cost financing through commercial banks, and the immediate release of approved margins.
The association also called for clarity on additional cost components, such as premium differential and regulatory duty gaps, which it said are further increasing the financial burden on importing OMCs.
OMAP recommended the formation of a joint legal and policy review committee comprising government and industry stakeholders to develop a sustainable long-term framework, along with a high-level engagement after Eid.
Reaffirming its commitment to ensuring uninterrupted fuel supply, the association urged authorities to take swift and decisive action, warning that delays in policy adjustments could escalate the situation into a full-scale supply crisis.