ISLAMABAD: Pakistan’s oil industry has warned that the revised petroleum pricing mechanism could force oil marketing companies (OMCs) to suspend petrol imports if the government does not amend the formula to reflect prevailing international procurement costs.
The Oil Companies Advisory Council (OCAC) has urged the government to revise the mechanism for pricing imported motor spirit (MS), arguing that the current formula could prevent importing companies from recovering their actual costs, potentially threatening the continuity of petroleum supplies.
In a letter to Federal Secretary for Petroleum Hameed Yaqoob Sheikh, the OCAC highlighted an issue in the revised petroleum pricing mechanism approved by the federal government on August 19, 2026.
Under the approved mechanism, if Pakistan State Oil (PSO) has no petrol import cargo during the preceding rolling seven working days, the calendar-year-to-date (CYTD) average of premiums, incidental charges and customs duty is used to determine the import price.
The OCAC argued that the historical average does not accurately reflect prevailing procurement costs when international petrol import premiums rise significantly. It proposed using the premium, incidentals, customs duty and applicable exchange rate adjustment associated with PSO’s most recent petrol import cargo instead.
“This would ensure that the administered price reflects the latest actual procurement cost, rather than a historical average which may be materially different from the replacement cost faced by importing OMCs,” the council stated.
Import Cost Gap Could Lead to Rs17 per Litre Under-Recovery
The industry has cited October’s shipment schedule as an example of the potential financial impact of the existing formula.
PSO has an approximately 10-day gap between cargoes scheduled for October 13-15 and October 26-28. During this interval, the current mechanism could revert to the CYTD average import premium of around $13 per barrel.
However, PSO’s subsequent cargoes are reportedly being procured at premiums of $28.47 per barrel for late October and $28.76 per barrel for early November. Other industry cargoes are also being secured at premiums substantially above the annual average.
According to the OCAC, applying the lower historical average during the intervening period could result in an estimated under-recovery of Rs16-17 per litre for importing OMCs.
The council maintained that basing the price on PSO’s most recent import transaction would provide a more transparent and market-linked mechanism, avoiding substantial differences between administered prices and actual replacement costs.
Heavy Reliance on Imports Raises Supply Concerns
The OCAC noted that Pakistan remains structurally dependent on imported petroleum products, with approximately 70 per cent of its motor spirit requirements met through imports.
It warned that a pricing mechanism that fails to account for prevailing procurement costs could undermine the financial sustainability of importing OMCs and jeopardise uninterrupted fuel supplies.
The proposed amendment would ensure that, whenever PSO has no petrol import cargo within the preceding seven working days, the pricing formula uses the premium, incidental charges, customs duty and applicable exchange rate adjustment of its latest import cargo rather than the CYTD average.
Industry Cites Mounting Financial Pressures
The council said the issue had been discussed with the Ministry of Energy’s Petroleum Division and the Oil and Gas Regulatory Authority (OGRA) on October 6. During the meeting, the OCAC was advised to submit its recommendation to the relevant forum for consideration.
The industry has also raised concerns over mounting financial pressures, including Rs66.7 billion in outstanding price differential claim (PDC) recoveries, stagnant OMC margins, rising operating expenses and increasing compliance requirements.
The OCAC has requested a meeting with the petroleum secretary and his intervention to ensure that the proposed amendment is considered urgently.
The council warned that aligning administered petrol prices more closely with actual import costs is essential to sustaining the participation of importing OMCs and maintaining the country’s petroleum supply chain.
Story by ZAFAR BHUTTA
