ISLAMABAD: The Oil Companies Advisory Council (OCAC) has written a letter to the State Bank of Pakistan (SBP) for a review of the merchant discount rate (MDR) of 1.5 percent on fuel purchases through credit or debit cards arguing that although the MDR varies across the industry; however, on an average around 1.5pc is being charged by banks at petrol pumps and the cost is being borne by the OMCs and their dealers (petrol pump owners and operators).

The letter also mentions that fuel (motor gasoline and diesel) prices, including the OMCs and dealers’ margins, are regulated by the government of Pakistan and the margins are fixed on an absolute basis and are not percentage of the final selling prices. The letter also said that the OMCs margin on MS, which is 3.69 per litre and 1.51pc of the price. Likewise, the dealers’ margin on petrol and diesel is Rs7 per litre each which is 2.86pc of the price of petrol and 2.99pc of diesel.

It further argued that despite high fuel prices, OMCs’ margin is very low and while businesses in other sectors can pass costs onto consumers, OMCs lack the ability to do so because their margins are regulated by the government of Pakistan. The MDR of 1.5pc being charged by banks is therefore eating into gross profits of the OMCs and their dealers and the oil industry realises the importance of enhancing the digital payment infrastructure of the country; however, the current level of MDR being charged on fuel transactions is not sustainable for the industry. The OCAC recommended the SBP governor that MDR on fuel purchased must be capped at 0.3pc.

Copyright Business Recorder, 2022