By Staff Reporter
ISLAMABAD: The federal cabinet has rejected a plan to boost profit margins for oil marketers and dealers, tying any increase to the full digitisation of the country’s fuel supply chain in a push to curb smuggling and revenue losses.
The decision, made during a meeting on Wednesday led by Prime Minister Shehbaz Sharif, overrides an approval last month by the Economic Coordination Committee of the cabinet to add Rs2.56 per liter to petrol and diesel prices in two stages, according to people familiar with the matter.
The ECC, chaired by Finance Minister Muhammad Aurangzeb on Dec. 9, had endorsed the hike to align margins with the national consumer price index for 2023-24 and 2024-25, capping increases at 5% to 10%. “It also decided that half of the increase in the margins will be paid immediately, while the remaining half will be conditional on the digitisation progress, with the Petroleum Division to report back by June 1, 2026,” the committee said in a statement at the time.
Under that plan, oil marketing companies would have seen their margins rise by Rs1.22 per liter, and dealers by Rs1.34 per liter, split into equal installments. The first bump, of 61 paise for OMCs and 67 paise for dealers, was slated for the next fortnightly price review on Dec. 15 or 31, lifting OMC margins to Rs8.48 per liter from Rs7.87 and dealer commissions to Rs9.31 from Rs8.64.
A second identical increase was set for June 1, 2026, contingent on digitizing sales and stock networks with live links to regulators including the Oil and Gas Regulatory Authority, the Federal Board of Revenue and the Petroleum Division. That would have pushed OMC margins to Rs9.10 per liter and dealers’ to Rs9.98.
But the government held off on the changes during price revisions on Dec. 15 and 31, even as fuel costs dropped sharply. Sharif, who has championed the Digital Pakistan Initiative and the sector’s end-to-end digitisation, insisted on full implementation before any margin uplift, potentially delaying it until June, the people said. They spoke on condition of anonymity to discuss internal deliberations.
The move aligns with efforts to overhaul the petroleum industry. Parliament passed the Petroleum (Amendment) Act 2025 in August, introducing IT-based tracking from imports and production through to retail sales. The law targets smuggling and adulteration, which inflict annual revenue hits of Rs300 billion to Rs500 billion, alongside environmental damage and vehicle wear. It mandates strict penalties for illegal transport, decanting and unauthorized pumps, aiming to plug leaks in a system plagued by porous borders and domestic evasion.
Local refineries and major oil marketers have repeatedly urged Islamabad, both individually and through industry groups—to tighten controls at frontiers and points of production and sale. Smuggling of fuels, including liquefied petroleum gas, undercuts their operations and starves the treasury, they argue.
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