The federal cabinet has blocked a proposal approved by the Economic Coordination Committee (ECC) to increase the commission for petroleum dealers and the profit margin for oil marketing companies (OMCs). The decision comes with the condition that the increase will only be implemented once the entire petroleum supply chain is digitised, with a deadline set for June 1, 2026, as reported by Dawn.
The ECC, during its meeting on December 9, 2025, had approved an additional Rs2.56 per litre increase for both OMCs and dealers in two phases. This hike was intended to improve profitability in the sector.
Under the initial plan, Rs1.22 per litre was allocated for OMCs, and Rs1.34 per litre for dealers. The first phase of the increase was to be implemented in December 2025, and the second in 2026, contingent on the digitisation of the supply chain.
The plan called for the digitisation of sales and stocks, connecting the petroleum sector with key government agencies like the Oil and Gas Regulatory Authority (OGRA), Federal Board of Revenue (FBR), and Petroleum Division.
However, Prime Minister Shehbaz Sharif opposed the two-phase hike and demanded 100% digitisation before implementing the increase. The digitalisation effort aims to combat smuggling and adulteration, which causes significant revenue losses estimated between Rs300-500 billion annually.
The government had already reduced product prices in the December 2025 price revisions but did not implement the margin increases for dealers and OMCs as initially planned.
A law passed in August 2025, the Petroleum (Amendment) Act, mandates the digital tracking of petroleum products from production to sale to curb illegal activities. This law includes stringent actions against smuggling, illegal transportation, and unauthorized petrol pumps.
Local refineries and OMCs have long advocated for stronger measures to tackle petroleum product smuggling, which harms their businesses and contributes to government revenue loss. The full implementation of the proposed changes depends on the completion of digital tracking systems, which the government is now prioritising.