OCAC seeks urgent OMC margin revision to prevent losses

January 24, 2025 (MLN): The Oil Companies Advisory Council (OCAC) has requested an immediate revision of the OMC margin, which was due in September 2024, to prevent financial losses.

In a letter written to Prime Minister Shahbaz Sharif, OCAC sought urgent intervention as the Finance Act 2024 changed the sales tax status of petroleum products from zero-rated to exempt supplies, leading to the disallowance of input sales tax claims.

The continuation of this exemption is significantly eroding profitability and placing severe financial strain on the industry.

This is jeopardizing the progress and sustainability of crucial capital-intensive projects essential for the uninterrupted supply of petroleum products nationwide.

OCAC is facing a substantial increase in operational and capital costs, which is impacting the financial viability of planned upgrade projects, infrastructure development, and day-to-day operations.

This delay nullifies the objectives of the Brownfield Refining Upgradation Policy, approved by the government in August 2023.

Despite continuous follow-ups over the past seven months and active coordination with the Ministry of Energy – Petroleum Division (MEPD), Oil and Gas Regulatory Authority (OGRA), and Federal Board of Revenue (FBR), the issue remains unresolved.

Efforts were also made to engage with the Ministry of Finance (MoF) and the Special Investment Facilitation Council (SIFC), but the issue remains unresolved.

This matter is critical for the survival of the industry in Pakistan, and its prolonged delay is causing significant challenges, the letter reads.

In June 2024, OCAC recommended an increase in the OMC margin based on critical cost considerations, including financing costs of maintaining a 20-day stock cover and turnover tax.

Additional factors included handling losses, demurrage costs, financing costs of unadjusted sales tax, and operating expenses incurred by OMCs.

OCAC respectfully seeks urgent intervention from the prime minister to facilitate a swift and amicable resolution of these issues.

OCAC is an independent organization formed by refineries, oil marketing companies (OMCs), and a pipeline company.

Its role is to represent the downstream oil industry at various government and non-government forums on matters relating to its members to ensure the continued viability of the downstream sector.

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