ISLAMABAD: The Oil Companies Advisory Council (OCAC) has urged the Oil & Gas Regulatory Authority (Ogra) to review and rationalise the existing recovery methodology for line fill financing costs, seeking permission for recovery at the actual financing rate incurred by Oil Marketing Companies (OMCs) to ease growing financial pressure on the industry.
In a letter to Ogra’s Executive Director (Finance) Altaf Hussain, OCAC Secretary General Syed Nazir Abbas Zaidi referred to Ogra’s letter dated January 13, 2026, and discussions held during a meeting on January 14, 2026, chaired by the Ogra Chairman, where key issues facing the oil industry—including line fill financing cost recovery—were deliberated.
OCAC noted that the issue, particularly the recovery rate applied to line fill financing costs, had already been highlighted in its correspondence dated July 4, 2024, but remains unresolved. The Council pointed out that while Karachi Interbank Offered Rate (KIBOR) is used as a benchmark, it does not reflect the actual borrowing cost faced by OMCs, as banks typically charge a premium of around two percent over KIBOR based on credit risk and other factors.
According to OCAC, recovery at KIBOR alone results in partial reimbursement of actual costs. For the period January–June 2025, the un-recovered variance amounted to approximately Rs 814 million, with financing costs recovered at average KIBOR (11.07 percent) standing at Rs 4.51 billion, against actual costs of Rs 5.32 billion at KIBOR plus two percent.
The Council warned that continued non-recovery of actual financing costs is unsustainable, adversely affecting cash flows, working capital, and the overall financial health of OMCs. OCAC emphasised that line fill is a regulatory and operational necessity to ensure uninterrupted petroleum supply, and its associated financing cost is legitimate and unavoidable.
OCAC stressed that Ogra, as the industry regulator, must ensure full recovery of prudently incurred costs in line with the principle of cost neutrality. Allowing recovery at actual borrowing rates, including the KIBOR premium, would support industry viability and help safeguard uninterrupted fuel supply to the national economy.
