ISLAMABAD, Feb 7: Prices of all the petroleum products and furnace oil are set to go up by 14 per cent across the board in two phases.

The first phase of around 6.5pc increase will come into effect immediately followed by the 7.5pc rise on July 1. This would ensure a 40pc return on equity to the Oil Marketing Companies (OMCs), petroleum ministry sources confirmed to Dawn on Thursday.

The increase comes as a policy decision of the Petroleum Advisory Council headed by Petroleum Minister Usman Aminuddin and comprising representatives of the OMCs and POL dealers.

Official sources said that the proposal had come from the OMCs but all the government functionaries in the advisory council supported the move aimed at increasing the OMCs’ distribution margin and dealers’ commission.

Under the decision that needs formal approval of the Economic Coordination Committee of the Cabinet at its forthcoming meeting, OMCs’ margin would be “increased by 3pc of the sale prices across the board immediately and 3.5pc with effect from July 1,” a member of the advisory council said.

The member told this correspondent that dealers’ commission would be increased from 3pc to 3.5pc immediately and to 4pc from July 1.

The official said that the director-general, oil, had prepared a summary for formal approval of the ECC under directives of the Petroleum Advisory Council.

The logic behind the decision is stated to be the OMCs’ “unmanageable” margin and dealers’ commission. OMCs’ margin currently stands at 64 paisa, 78 paisa, 19 paisa and 28 paisa per litre of petrol, HOBC, Kerosene oil and high speed diesel, respectively.

Similarly, the dealers’ commission is Re1.01, 89 paisa and 43 paisa per litre of HOBC, petrol, and high speed diesel, respectively.

After a couple of initial increases, the deregulation of petroleum prices had resulted in reduction of rates following a decline in international oil prices. This benefit of international market decline would, however, cease to be available with the fresh increase.

For example, the price of petrol premier was reduced from Rs33 per litre to Rs30 at present. However, it would again go up to Rs34 per litre with the fresh decision. This would be in addition to any increase as a result of international oil price surge.

Pakistani surplus petrol is sold at around Rs10 per litre abroad while the same is supplied to local consumers at Rs30 per litre.

At present, the federal government is earning Rs17.25 to Rs20.71 on every litre of petrol in the form of various taxes and charges against the original (ex-refinery) price of Rs10.81 to Rs11.29 per litre. The government’s profit in motor spirit and HOBC is around 160pc and 183pc, respectively. Last month, the federal government had increased petroleum development levy by 75 paisa per litre on diesel and by 25 paisa per unit increase on all other petroleum products, including petrol.