Oil marketing companies (OMCs) in Pakistan have raised serious concerns over the Oil and Gas Regulatory Authority’s (OGRA) proposed ‘Take or Pay’ clause in sales and purchase agreements with local refineries. This clause mandates that OMCs must either procure their allocated petroleum product quotas from domestic refineries or face financial penalties. OMCs argue that this arrangement unfairly transfers financial risks onto them, especially amid volatile market conditions.
Tariq Wazir Ali, chairman of the Oil Marketing Association of Pakistan (OMAP), representing approximately two dozen small and medium-sized OMCs, has formally opposed this clause. In a letter to OGRA, he highlighted that many OMCs are already facing financial challenges, and the ‘Take or Pay’ clause could exacerbate their struggles, potentially leading to market monopolization by larger entities.
The introduction of this clause follows complaints from local refineries about excessive fuel imports undermining domestic production and reducing operational capacity. However, OMCs contend that the clause disproportionately benefits refineries by insulating them from market volatility while exposing OMCs to increased financial risks.
Additionally, the All Pakistan Petroleum Dealers Association (APPDA) has threatened a nationwide strike over the government’s plan to deregulate oil prices without consulting key stakeholders. They argue that deregulation could grant foreign companies a monopoly over Pakistan’s oil market, jeopardizing energy security and leading to economic repercussions.
This dispute arises as petroleum product prices are expected to decrease significantly later this week, with petrol prices potentially dropping by Rs12 per litre and high-speed diesel by Rs8 per litre.
The situation underscores the need for a balanced approach that considers the interests of both OMCs and refineries to ensure a stable and efficient petroleum supply chain in Pakistan.
