ISLAMABAD: The Oil Companies Advisory Council (OCAC) has raised serious concerns over the regulator’s failure to implement the government-approved increase in oil marketing companies’ (OMCs) margins and the lack of a clear mechanism for full recovery of investments made in digitisation.
In a letter addressed to the Chairman of the Oil and Gas Regulatory Authority (Ogra), OCAC highlighted the absence of a notification for the 50 per cent increase in OMC margins on motor spirit (MS) and high-speed diesel (HSD), which was approved by the Economic Coordination Committee (ECC). According to OCAC, Rs0.61 per litre, out of the total approved increase of Rs1.22 per litre, was meant to take effect from December 15, 2025, with the remaining half linked to the achievement of digitisation targets.
However, OCAC said that during a meeting held on January 14, 2026, the industry was informed that the federal cabinet had advised linking the entire margin increase to 100 per cent digitisation. While reiterating the industry’s commitment to digitisation, OCAC noted that this revised linkage had effectively delayed even the already-approved immediate increase, placing additional financial pressure on OMCs.
“OMCs continue to operate under a regulated margin framework that has remained unchanged for over two years and does not reflect rising costs related to operations, financing, compliance and mandatory digitisation initiatives,” the council stated. It urged Ogra, in coordination with the Ministry of Energy (Petroleum Division), to take up the matter with the cabinet and seek immediate notification of 50 per cent of the approved margin increase, effective from December 15, 2025.
OCAC also recalled that it had shared a proposed digitisation cost recovery mechanism with Ogra through a letter dated January 12, 2026. To ensure transparent and timely recovery of digitisation investments, it proposed the creation of a dedicated “Digitisation Fund”, structured as an escrow-type account within the MS and HSD price framework, similar to existing statutory levies such as the petroleum levy and climate support levy.
Under the proposal, milestone-based reimbursements would be made against verified implementation, including compensation for substantial investments already undertaken by OMCs. OCAC suggested that a combined margin of Rs2.56 per litre for OMCs and dealers be incorporated into the price structure as a separate line item, equally split between MS and HSD at Rs1.28 per litre each.
The industry body called on Ogra and the Petroleum Division to seek ECC approval for the inclusion of this separate line item and to exercise joint oversight of the fund. It also proposed maintaining the account as a savings account, with returns used to further support digitisation initiatives.
OCAC demanded immediate reimbursement within 15 days of the establishment of the mechanism, covering both capital and operational costs. It stressed the need to recover investments in auto tank gauging (ATG) systems installed at retail outlets, contributions to the Raahguzar App, and investments made by OMCs and refineries in the track-and-trace system. As an initial milestone, OCAC proposed the installation of ATGs at 10 retail outlets per OMC, with reimbursements to begin within 15 days of verification of documentation.
The council suggested that the mechanism remain in place until 2030, in line with digitisation timelines submitted by OMCs, and be extended thereafter to cover maintenance and future technological upgrades. Alternatively, if the proposed mechanism is not adopted, OCAC recommended a ring-fenced recovery through the inland freight equalisation margin (IFEM) by incorporating the approved per-litre digitisation cost into each OMC’s notified cost structure, with fortnightly recovery and reconciliation ensured by Ogra.
Emphasising the urgency of the matter, OCAC warned that delays in finalising margin adjustments and digitisation cost recovery could undermine the financial viability, regulatory compliance and uninterrupted fuel supply operations of oil marketing companies.
Story by Zafar Bhutta
