Petroleum dealers in Pakistan have declared an indefinite closure of filling stations across the country beginning Saturday am. The decision was made after the outgoing government failed to keep its promise of expanding profit margins, leaving them dissatisfied with the current scenario.
Pakistan Petroleum Dealers Association (PPDA) Chairman Samiullah Khan voiced anger during a news conference held at the Karachi news Club about the government’s unwillingness to enhance their profit margin on the sale of two major petroleum products to 5%. With petrol and diesel prices currently regulated at Rs253/litre and Rs253.50/litre, respectively, the 5% margin would equate to more than Rs12 per litre.
A dealer subsequently told The Express Tribune that Minister of State (Petroleum Division) Musadik Malik had contacted the chairman of the association and promised to meet with them in Karachi on Saturday.
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However, if no meeting is held or if no good outcome is reached, the strike will continue, save on the two days of Muharram 9-10 (July 28-29) to ensure that the holy occasion is not disrupted.
According to the most recent fortnightly working for setting petroleum product prices, effective July 16, dealers were earning Rs7/litre rather than the reported Rs6/litre. However, this Rs7 margin falls far short of the 5% demand that traders have consistently made, a promise made by the government after taking power in April 2022.
Malik Khuda Baksh, a member of the association, recalls that they were awarded profit margins in percentage terms from 2002 to 2004, which proved useful because the margins adjusted with the country’s fluctuating gasoline prices.
The outgoing government set the margin at Rs6/litre and promised a later conversion to 5%. Despite the association’s numerous attempts to meet with Malik, they have received indifferent responses, compounding their displeasure.
Rising business costs have eroded profit margins, leaving many dealers with negative profits. With the parliamentary term coming to a conclusion, the delay in honoring the government’s commitment has put the dealers in a vulnerable position.
Furthermore, the availability of Iranian smuggled products, particularly diesel, in local markets has created a new difficulty for dealers, resulting in a 30% drop in sales.
With today’s margins, it’s practically hard for filling stations to run efficiently.
Khan stated that there are 12,000 filling stations nationally, with around 10,000 of them belonging to the group. He also emphasized the frightening inflation rate, which reached a six-decade high of 38% in May, with annual average inflation soaring to 29% in FY23, up from 11% in FY22. Power and gas prices have risen, and the benchmark KIBOR for bank borrowing has risen to an all-time high of 23%.
He further emphasized that the government initially promised 5% margins in 1999, subsequently cutting them to 4% by 2004, and finally settling on Rs6 (2.4%) during its current tenure.
In the fiscal year 2023, demand for petroleum oil products (POL) in Pakistan has dropped to a 17-year low of 16.61 million tonnes, representing a dramatic 27% year-on-year (YoY) fall.
