Petrol dealers end strike as govt agrees to hike margins

November 26, 2021(MLN): The Pakistan Petroleum Dealers Association (PPDA) has called off the strike on Thursday night after the assurance from the government that profit margins will be increased by 99 paisa per litre or 25 percent, according to the media sources.

Meanwhile, Minister for Information and Broadcasting Chaudhary Fawad Hussain also announced the end of the strike by PPDA.

The government and the association’s chairman, Abdul Sami Khan, reached the agreement after holding day-long negotiations. Adviser to the Prime Minister on Finance Shaukat Tarin, Energy Minister Hammad Azhar and Petroleum Secretary Arshad Mahmood as a part of the government team spoke to the association’s representatives as more than 80 percent petrol pumps in all major cities remained closed, causing severe distress to the people.

The Petroleum Division of the Ministry of Energy, later, issued a handout that stated: “All stakeholders appreciated the Petroleum Division’s proposal for enhancement of 99 paisa in the existing margin of petrol i.e., Rs3.91/litre and 83 paisa in the existing margin of high-speed diesel i.e. Rs3.30/litre.”

In the summary, there are proposals to raise margins for both petroleum dealers and OMCs by 25.2% (Rs0.83-0.99/liter) and 23.3% (Rs0.71/liter) respectively.

The document obtained by media houses said, “All parties clearly understand that passing on the extra costs to the general public/ consumers of petroleum products is not viable. However, Petroleum Division assured the association that after 6 months (during June 2022) margins will be readjusted according to the level of inflation prevalent at the time.”

Petroleum Division has assured that the agreement will be presented during the upcoming Economic Coordination Committee (ECC) meeting before the next fortnightly fuel price revision due on Nov 30.

“It is believed that implementation of this agreement seems to be likely due to the fact that oil prices in international markets are on a declining trend,” a research note by Sherman Securities underlined.

Regarding OMCs, it is not clear whether the government will raise their margin by 23.3% or the raise will be lower than that. Meanwhile, the report believes that this raise will be in the range of 10-15%.

However, if margins are increased by 23.3%, OMCs will be major beneficiaries given the fact that they will get future raise in margins in one go. The annualized EPS of PSO, APL and Shell are likely to improve by Rs11.5, Rs8, and Rs3 respectively, it added.

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