• Margin raised by Rs1.34 to Rs9.98 per litre on petrol, diesel
• Increase estimated to cost consumers over Rs26bn annually

THE federal government’s decision to raise petroleum dealers’ commission by Rs1.34 per litre may appear modest at the pump, but given the country’s annual petrol and diesel consumption, consumers could end up paying more than Rs26 billion extra each year.

The increase, approved after petroleum dealers threatened a countrywide strike, raises their margin on both petrol and high-speed diesel to Rs9.98 per litre from Rs8.64.

For consumers already grappling with the highest fuel prices since March amid the war in the Middle East, the decision raises an important question: who ultimately bears the cost of higher dealer margins?

The increase was approved on the Aug 14 public holiday, shortly before petroleum dealers were due to begin their nationwide strike. The government had already addressed another concern of dealers by substantially reducing charges associated with debit-card transactions, lowering their operating costs.

The latest decision reflects not only a response to industry demands but also a policy choice with implications for fuel prices and household budgets.

However, the government did not accept the dealers’ principal demand to replace daily fuel price adjustments with monthly or quarterly revisions.

Instead, it agreed to raise the dealers’ margin — a cost ultimately built into the retail prices of petrol and diesel. The decision helped avert a nationwide shutdown of filling stations but shifted the additional financial burden to motorists, businesses and households.

The government’s approach has also drawn comparisons with its handling of the goods transporters’ strike, which has continued for more than a week without all of their demands being accepted. In contrast, the government moved quickly to address one of the petroleum dealers’ long-standing demands to prevent a nationwide closure of fuel stations.

However, the two disputes involve different issues. An increase in dealers’ margin has a direct impact on consumers because the amount is incorporated into the retail price of every litre of fuel sold.

It is also believed that influential business and political figures are among petrol pump owners, meaning an increase in dealers’ margins could benefit a broad group of investors as well as ordinary dealers.

To understand the impact, it is important to look at how retail prices of petrol and diesel are determined. Every litre sold carries several fixed charges and levies, including margins for oil marketing companies (OMCs) and dealers, the inland freight equalisation margin (IFEM), climate support levy, petroleum levy and customs duty.

The Aug 14 pricing structure showed that, excluding customs duty, the retail price of petrol already included Rs108.99 per litre in fixed charges, including the petroleum levy, climate support levy, OMC margin and dealers’ margin. For high-speed diesel, these charges stood at Rs104.42 per litre.

With the latest increase, consumers will pay another Rs1.34 on every litre of petrol and diesel sold.

Based on Pakistan’s average monthly petrol consumption of about 660,000 tonnes, or 926.64 million litres, the increase will cost consumers an additional Rs1.24bn every month, or nearly Rs15bn a year, assuming consumption remains unchanged.

Similarly, average monthly diesel consumption of around 600,000 tonnes, or 714m litres, means consumers will pay an additional Rs957m every month, or nearly Rs11.5bn annually.

Combined, the additional burden comes to about Rs2.2bn a month, or more than Rs26bn a year, at current consumption levels.

The cost will be embedded in fuel prices and ultimately borne not only by motorists but also by businesses and households through higher transportation and production expenses.

Dealers’ margin

A dealer’s margin is the commission paid to petrol pump owners for selling fuel. It is built into the retail price of petrol and diesel and is therefore paid by consumers with every litre purchased.

The latest increase of Rs1.34 per litre, taking the margin to Rs9.98 from Rs8.64, was one of the key demands of the Pakistan Petroleum Dealers Association (PPDA), which had been pursuing the issue for the past three years.

Newly elected PPDA Chairman Malik Khuda Buksh said resolving the pending increase in dealers’ margin had been his top priority since assuming office 14 days ago.

“This Rs1.34-per-litre increase in our margin is a three-year-old demand,” Mr Buksh told Dawn, adding that the association had succeeded in securing most of its immediate demands.

Besides the margin increase, the association had sought relief on charges associated with digital transactions.

Mr Buksh said the government had agreed to replace the existing charge on debit-card payments with a fixed charge of Re1 per litre, a move he described as providing dealers with nearly 70 per cent relief. He said the association would now press for elimination of the charge altogether.

However, the government did not accept the dealers’ demand to replace daily fuel price adjustments with monthly or quarterly revisions.

“One of our demands is to be recognised as a stakeholder in any future policy change,” Mr Buksh said.

The PPDA chairman also said the association had persuaded the government to abandon its earlier plan to link higher dealers’ margins with mandatory digitisation of petrol pumps.

“We have successfully delinked this demand of the government,” he claimed.

Despite securing the latest increase, the PPDA intends to continue pursuing its principal demand that the dealers’ margin be linked to the retail price of fuel and fixed at 8pc of the selling price instead of a fixed rupee amount per litre.

If accepted, dealer earnings would automatically rise whenever petrol and diesel prices increase.

Price impact

Higher fuel prices inevitably feed into transportation and production costs, with freight operators, public transport providers and businesses generally passing at least part of the additional expense on to consumers.

This could affect the prices of vegetables, milk, groceries, medicines and manufactured goods, while transport fares may also come under upward pressure.

Although the Rs1.34 increase appears small on a per-litre basis, its impact spreads across the economy because fuel is a critical input in the movement of goods and people.

Published in Dawn, August 16th, 2026