Strike and government maneuvers lead to division among oil traders – Pakistan

• Karachi traders say petrol stations across the country will be closed from 6am today
• A PPDA group accuses the Karachi branch of prioritising the interests of the OMCs
• Government hints at higher commissions and passes tax burden on to consumers

ISLAMABAD: The official machinery appears to have formalised a split among protesting petroleum traders by convincing some of them to pass on the impact of sales tax to consumers by promising higher commissions on the sale of petroleum products.

Meanwhile, oil marketing companies (OMCs) have demanded a 60 percent increase in their profit margins.

Abdul Sami Khan, Chairman of the Pakistan Petroleum Dealers Association (PPDA), said dusk from Karachi that petrol pumps across the country would remain closed from 6 a.m. on Friday, although some people, whose names he could not reveal, were “resorting to intimidation.”

On the other hand, the petroleum department asked all six chief secretaries of the four provinces of Azad Jammu and Kashmir and Gilgit-Baltistan to allow “operation of oil tankers” during daytime on July 5 to ensure uninterrupted supply of petroleum products to the open outlets “in case the strike takes effect”. Under normal circumstances, operation of oil tankers is not allowed during daytime.

The provincial governments were also asked to “strive for or facilitate the opening of as many petrol stations as possible and to appoint contact persons for close coordination”.

Oil distribution companies have already been ordered to keep their outlets operational during the strike and to stay in touch with the Ministry of Energy’s monitoring cell.

A joint statement by Ogra and the petroleum department said that there was sufficient availability of petroleum products in the country and all OMCs had been advised to ensure adequate stocks at petrol stations.

In Islamabad, officials not belonging to the petroleum department, Federal Board of Revenue, Ministry of Finance or Ogra were seen talking to traders to persuade them to call off the strike.

Government officials reportedly hinted at a possible increase in dealer commissions to offset the 0.5 percent sales tax, meaning an increase in commission from the current Rs 8.64 per litre to at least Rs 11.20.

A trader said that an adjustment in commissions and OMC margin is already due in the new financial year and the government is only trying to apportion them.

Sources said the government has not given any commitment at this stage to avoid similar pressure tactics on other sectors that will have to bear the brunt of the additional tax burden, but the mediators promised them a positive outcome in due course.

The dealers promised to keep their petrol stations in Rawalpindi, Islamabad and Lahore fully operational on Friday.

OMCs aim for higher margins

Meanwhile, oil marketing companies have officially demanded an increase in their profit margin on sale of petrol and diesel from the current Rs 7.87 to Rs 12.65 per litre, an increase of 60 percent.

The Oil Companies Advisory Council (OCAC), on behalf of the OMCs, has recommended that this increase is necessary due to the “financing cost of maintaining 20 days storage cover, sales tax, handling losses, demurrage, financing cost of unadjusted sales tax and operating costs incurred by the OMCs”.

There are currently about 14,000 petrol stations in the country, of which about 4,000 are owned or directly operated by the major oil marketing companies.

A group of traders from Lahore and Rawalpindi calling themselves the Reformers Group of PPDA announced that they would not take part in the July 5 strike. In a statement, they said their group would prefer detailed negotiations with the authorities before opting for “extreme options” such as an indefinite strike.

“After the call for a strike, negotiations are pointless, so petrol stations across the country will remain open on July 5, as the country’s economy cannot be paralyzed in this critical situation,” it said.

Hasan Shah, the group’s spokesman, said a delegation led by PPDA leader Numan Ali Butt from Rawalpindi met Finance Minister Ali Pervez Malik and informed him that oil traders could be taxed either by fixed or regular tax. A company cannot be taxed in both ways and if it does, it will be illegal and petrol stations will be closed, he explained.

The minister assured them that the chairman of the FBR would look into the matter, the group said in a statement.

Mr Shah said that detailed discussions were underway. “If there is no success, any decision will be taken after consultation with the organisation of every district in the country,” he said.

“We reject the call for a strike by some traders in Karachi because they work in the interest of oil distribution companies and do not care about the interests of their own community.”

Published in Dawn, July 5, 2024