THE Economic Coordination Committee has hiked the per litre commission margins of petroleum dealers and oil marketing companies by Rs1.64 and Rs1.87, respectively, on their petrol and diesel sales. The margins for both petroleum dealers and the OMCs will be increased incrementally in four equal fortnightly instalments from Sept 15. With the fresh increase, the dealers’ margins will go up to Rs8.64 from the existing Rs7, while OMCs will see them increase to Rs7.87 from the present Rs6. The commitment to raise the dealers’ and OMCs’ margins in four steps from Sept 1 was given by the previous PDM coalition government in July after dealers threatened to shut down pumps and stop sales. But it did not notify the increase. Both the OMCs and dealers have been demanding 100pc increase in their profit margins on the sale of petroleum products for several months to ‘ensure the survival’ of the industry. The dealers’ margin on petrol and HSD used to be Rs4.90 and Rs4.13 per litre until mid-July last year, but has since been raised to Rs7. Likewise, the OMCs’ margin was later hiked from Rs3.68 per litre to Rs6 in phases.

The increase in margins will definitely put more financial burden on consumers at a time when domestic oil prices are being raised since Aug 1 to pass on to them the impact of rising global oil prices and the precarious exchange rate. But it was important to mitigate the stress on the dealers and OMCs considering the continued surge in the prices of utilities, interest rates, and labour costs that have more than doubled in the last one year. The 30pc reduction in their sales due to the unabated smuggling of cheaper Iranian oil in large quantities has also been eroding their sales revenues and profits. While escalating inflation remains a major worry, it needs to be dealt with by fixing the economic fundamentals rather than straining one industry or sector.

Published in Dawn, September 10th, 2023