Infrastructure cess: OMAP lodges protest against Sindh govt decision

ISLAMABAD: The Oil Marketing Association of Pakistan (OMAP) has protested against the Sindh government’s decision to collect infrastructure cess without adjusting it in the regulated prices of petroleum products.

In this regard, OMAP has written letters to Secretary Petroleum and other concerned federal and provincial authorities, terming the move by the provincial government “unjustified.”

“We wish to lodge a strong and urgent protest on behalf of all Oil Marketing Companies (OMCs) against the recent implementation of the Sindh Government’s Infrastructure Cess Tax at 1.85 percent, which has been enforced without its proper incorporation into the regulated pricing structure. This levy translates into an additional burden of approximately Rs 2.5 to Rs 3 per litre, directly eroding the already thin margins of OMCs and threatening their operational viability,” the letter stated.

OMAP protests over Sindh cess deduction without price adjustment

According to the OMAP, OMCs operate in a fully regulated environment, where product pricing, margins, and all cost elements are determined strictly under the prescribed formula. Therefore, OMCs have no legal or operational discretion to absorb any additional cost or deduction beyond the approved pricing formula.

“The recent move to impose or deduct 1.85 percent Sindh Cess from OMCs’ profit margins is neither tenable under law nor consistent with the established regulatory mechanism,” OMAP maintained.

The association pointed out that OMCs are already functioning under extremely thin and insufficient profit margins that barely ensure operational sustainability. Deduction of an additional 1.85 percent from such limited margins, it warned, would render business viability impossible, leading to operational and supply chain disruptions. This situation, OMAP added, contradicts the very objective of the regulatory framework, which is to ensure a fair return and uninterrupted petroleum supply.

“Petroleum products are regulated items and their prices are determined by the government, any levy, Cess, or tax imposed by a provincial or federal authority must first be incorporated into the pricing formula. Unless this 1.85 percent Cess is integrated within the regulated price mechanism by OGRA, the implementation of this deduction cannot and must not be applied to OMCs,” the association asserted.

The OMAP further stated that, in view of the above, it makes a strong legal plea that the Ministry of Energy (Petroleum Division), being the competent authority, should immediately halt the implementation of this decision until the Cess is duly reflected in the government-notified price structure. Any premature implementation, it added, would be in violation of the Petroleum (Marketing) Rules, the OGRA Ordinance, and established pricing principles. “We urge the authorities to intervene urgently and suspend any such deduction or adjustment until the matter is legally reviewed and appropriately resolved through inclusion in the official pricing formula. Failure to address this issue will undermine investor and operator confidence in the regulated petroleum sector,” said Tariq Wazir Ali, Chairman OMAP.

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