Profit margins of OMCs: Ogra opposed to proposed deregulation

The Oil and Gas Regulatory Authority (Ogra) is strongly opposed to the proposed deregulation of profit margins of oil marketing companies (OMCs) and petroleum dealers, fearing that the move will encourage them to form a cartel and fix retail prices at the expense of consumers, sources said.
Ogra has recommended that the government continues the existing mechanism which was established to set profit margins of OMCs and dealers based on the Consumer Price Index (CPI). However the final decision would be made at Economic Co-ordination Committee (ECC) of the Cabinet which is yet to be scheduled after Prime Minister Shahid Khaqan Abbasi took over as the Prime Minister and issued a notification to the effect that the Prime Minister as opposed to the Finance Minister will chair it.
Ogra in its recommendations to Federal Government stated that petrol and diesel are the two widely used petroleum products and if OMCs and dealers are given a free hand, it is feared that they may create a monopoly to the detriment of the general consumers.
Sources pointed out that because of an increase in the consumption of petroleum products, OMCs and dealers were already making hefty profits and the deregulation of margins would give them windfall profits.
The deregulation debate began after the Ministry of Petroleum and Natural Resources, when its portfolio was held by the current Prime Minister, had asked the ECC headed by Ishaq Dar in June 2017 to permit OMCs and dealers to set their own margins on two major petroleum products - high-speed diesel and petrol.
In the first phase, the Ministry proposed deregulation of margins on high-speed diesel (HSD), which is widely consumed in agricultural and transport vehicles. In the next phase, petrol margins were proposed to be deregulated to encourage more investment by the industry.
The margins were determined by the Ministry of Petroleum and Natural Resources in a market where six firms have an HSD market share of 87.9 percent; however there is as yet little clarity after the merger of the Ministry of Water and Power and Ministry of Petroleum and Natural Resources into the Energy Ministry.
According to Oil Companies Advisory Council (OCAC), Pakistan consumes 600,000 tons of high-speed diesel per month whereas petrol demand stands at 550,000 tons per month. Consumption of petrol is increasing by 20 percent every year after compressed natural gas (CNG) filling stations switched to imported liquefied natural gas (LNG) from domestically produced gas.
At present, OMCs charge Rs 2.41 in margins on a litre of petrol and high-speed diesel whereas dealers collect Rs 3.16 on petrol and Rs 2.67 on diesel. OMCs, however, have demanded a raise of Rs 0.18 per litre. For dealers, an increase of Rs0.14 per litre on petrol was sought.