ISLAMABAD: The Economic Coordination Committee (ECC), which meets today (Tuesday), is set to take up proposals that could push fuel prices higher for consumers as the government considers increasing margins for Oil Marketing Companies (OMCs) and petroleum dealers by up to Rs 1.79 per litre.
The proposals framed under a new Consumer Price Index (CPI)-based mechanism would replace the existing cost-plus formula and, if approved, will be directly incorporated into the retail prices of petrol and diesel.
Today’s ECC meeting comes with a packed agenda. The committee is also expected to approve a new electricity purchase agreement with Iran, the Circular Debt Management Plan for FY2025–26, and a technical supplementary grant of Rs 1.28 billion for the Pakistan Digital Authority. The agenda includes a proposal to ban the import of chloroform, a Commerce Division summary regarding the Gift Scheme, and approval of a Rs 5 billion technical supplementary grant for housing sector subsidies.
Additionally, the ECC will review a summary on Passco’s dissolution and the creation of a special vehicle for the Wheat Stock Management Company, as well as a request for budget release for the PIA Holding Company.
Turning to petroleum margins, the most significant proposal before the ECC — Option II — recommends raising the OMC margin by Rs 1.63 per litre and the dealers’ margin by Rs 1.79 per litre. The proposal is based on average national CPI inflation for FY2023–24 and FY2024–25 with a 5–15% adjustment band. Officials say approval of this option could result in a noticeable rise in fuel prices, further burdening households already grappling with high inflation.
Two other proposals have also been floated. Option I, favoured by the Petroleum Division, suggests a moderate increase of Rs 1.22 for OMCs and Rs1.34 for dealers, using a narrower CPI band of 5–10 per cent. Option III proposes the smallest hike —Rs1.05 for OMCs and Rs1.15 for dealers — based on a 3–10 per cent CPI range. The Finance Division has raised no objection to any of the proposals, clearing the way for the ECC to endorse a margin revision, though the final decision remains pending.
The shift to a CPI-linked approach follows an ECC directive issued in September 2023, instructing the Oil and Gas Regulatory Authority (Ogra) to devise a structured methodology for margin revisions anchored in PSO’s operating cost model. Since then, industry groups have advocated for much steeper increases.
The Oil Companies Advisory Council (OCAC) has demanded a Rs 2.13 per litre rise to lift OMC margins to Rs 10, while the Oil Marketing Association of Pakistan (OMAP) has pushed for an aggressive Rs 8.13 increase to take margins to Rs 16. The CPI-based options now before the ECC reflect a tempered and inflation-indexed compromise after extensive consultations among the Petroleum Division, Finance Division, and OGRA.
Officials familiar with the deliberations say the ECC’s decision will not only affect immediate fuel prices but also lay the foundation for a long-term adjustment mechanism. Under the OGRA’s recommendation, future CPI-based revisions would take effect annually from September 1, making inflation-driven increases a regular feature of fuel pricing.
For consumers, any margin increase, particularly under the higher-end proposal, would be passed on directly, potentially pushing petrol and diesel prices up by as much as Rs 3.50 per litre.
