OCAC Warns Against Hasty Unilateral Decision on Oil Sector Deregulation

By Salman Khan

Oil Companies Advisory Council (OCAC) has warned the petroleum secretary that that any unilateral decision on deregulating the downstream oil sector in haste could have serious consequences for the oil industry.

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Chairman Oil Companies Advisory Council (OCAC), a body of refineries and oil marketing companies (OMCs) in a letter to the Secretary Petroleum Division had drawn the attention towards a letter written on November 19, 2024 in which they had requested the inclusion of major private sector stakeholders in the working group established to develop a roadmap for the future strategy of deregulating the downstream oil sector in Pakistan.

We understand that the Government is in the process of formulating a policy for the deregulation of petroleum product prices in the near future,” he said adding that however, it is concerning to note that private-sector refineries and oil marketing companies (OMCs), which play a pivotal role in the downstream oil industry, have not yet been included in the consultation process.

Chairman OCAC Adil Khattak said that it is critical to highlight that the industry is already facing existential challenges due to issues such as the exemption of sales tax on petroleum products, the smuggling of petroleum products, delays in the revision of OMC margins, and other challenges that have been repeatedly emphasized.

We strongly urge you to involve private-sector refineries and OMCs in the consultation process to ensure the development of a balanced and workable deregulation policy for the country,” he said and warned that any unilateral decision on such a critical matter made in haste will have severe ramifications for the oil industry and could exacerbate the existing challenges it faces.

Adil Khattak said that they had earlier also requested that the private sector major stakeholders should be included in consultation for deregulation/ revision of pricing mechanism of petroleum products but it went unheeded.

The refineries and OMCs are already faced with existential crisis due to unwarranted exemption of petroleum products from Sales Tax in the Finance Act 2024-25 making not only normal operations unsustainable but also jeopardising implementation of the Brownfield Refining Upgradation Policy.

While the sales tax issue still remains unresolved inspite of numerous meetings and directives of Prime Minister and SIFC, taking up revision of petroleum products’ pricing mechanism at this stage is not only ill timed but non inclusion of private sector stakeholders in consultation can lead to complications as we have witnessed in formulation and implementation of the Brownfield Refineries Policy over last five years.

He said that while the Prime Minisrer and Finance Minister are repeatedly stressing inclusion of private sector in consultation the mandarins in the Petroleum Division apparently think otherwise or may be they feel more comfortable working with public sector companies only. On behalf of Oil Companies Advisory Council I would like to assure them of our fullest cooperation in the best national interest,” he added.