July 12, 2021: Oil Marketing Association Pakistan (OMAP) on Monday regretted that government actions related to the Oil Marketing Companies (OMCs) were making the business environment for them restrictive and discouraging.
OMAP said this in a statement after the inaugural meeting of Federation of Pakistan Chambers of Commerce & Industry’s (FPCCI) Central Standing Committee on Oil Marketing Companies.
OMAP, which represents the oil marketing sector, was represented at the meeting by its Chief Executive Officer Dr Ilyas Fazil along with all members of the association.
The issues raised by OMAP at the meeting included renewal of OMC licenses by Oil and Gas Regulatory Authority (OGRA), the witch-hunt of the OMCs in the name of ‘Forensic Audit’ by various governmental agencies, the fixation of margins, and high rate of turnover tax.
“The steps being taken by the government with regards to OMCs run contrary to the current government’s claim of promoting ease of doing business,” OMAP said adding that these negative but highly visible actions are also sending the wrong signals to potential investors in the oil marketing sector.
OMAP said that “legitimate and licensed OMCs” had been running for over a year now from pillar to post for extension/renewal of their licenses issued by OGRA. This issue had started in the aftermath to the so-called June 2020 Petrol Crisis. It must be noted that all these licenses had been approved by OGRA prior to June 2020.
“This is happening in spite of us not only submitting all documentations needed, including evidence of progress on our projects, but also submitting all related payments due to OGRA. This is seriously hampering our ability to supply product to the Market to feed our over 1,100 Retail Outlets,” OMAP said while categorically denying role of any of its members in the petrol crisis.
Moreover, the association claimed that ‘Forensic Audits’ have been initiated by various agencies despite the fact that all evidence and data had been submitted to the FIA Fuel Crisis Commission as well as the recent Lahore High Court’s judgement in a Public Interest Litigation.
OMAP called for an end to the scapegoating of OMCs and holding of a targeted enquiry. It said that a freehand should not be given to various institutions which are harassing the industry by asking for information pertaining to years before the crisis, which has no relevance at all to last year’s events.
OMAP said that the ‘margins’ fixed by the government were OMCs’ only source of recovering their costs in a regulated market. But, still the fixation is not only done late, but the prescribed margins are also not commensurate with the consumer price index and the operational costs of the OMCs.
OMAP called for reduction of the rate of turnover tax (currently @ 0.75%) to 0.25% in order to provide much needed relief to cash flows and profits.
As per FBR’s latest clarification, the minimum tax on turnover at the rate of 0.25 percent would be applicable on the distributors of pharmaceutical products, fast moving consumer goods and cigarettes; as also petroleum agents and distributors which are registered under the Sales Tax Act, 1990. OMAP stated that OMCs too sell petroleum products which also fall under the definition of fast-moving goods with their retail outlets being replenished daily following each sale of petroleum product. In all fairness, OMCs too must be charged 0.25% in line with similar categories as above
The FPCCI’s Tax Anomalies Committee has been requested to evaluate this matter and to raise it at the appropriate forums, namely, FBR and the Ministry of Finance.