OMAP seeks end to Sindh’s 1.25pc infrastructure cess on imports

LAHORE: Oil Marketing Association of Pakistan (OMAP) has asked the government to remove a 1.25pc infrastructure cess on imports made through Karachi Port, saying the tax is not integrated into the existing price mechanism formula and hitting their profit margins.

In a letter to Minister of State for Petroleum Musadik Malik, OMAP asked the minister to play his role in ending the cess to support the oil industry. OMAP chairman Tariq Wazir Ali in the letter demanded immediate intervention from the ministry to safeguard the interests of the oil marketing sector and the petroleum industry.

He wrote that under the Sindh Government Infrastructure Cess Tax, a levy of 1.25 percent is imposed on all imports made through Karachi Port. “This issue holds significant gravity and has directly impacted the profit margins of OMCs, leading to a substantial decline of nearly 40 percent,” he said, adding that it’s essential to highlight that due to the regulated formula governing the determination of prices for diesel, gasoline, and other products, any new component must be incorporated into the pricing formula.

Given the critical nature of this matter, which further compounds the challenges faced by the struggling oil industry, “we humbly request your prompt attention to save the petroleum industry from impending disaster,” he explained.

Talking about role of the Oil and Gas Regulatory Authority (OGRA), Tariq Wazir Ali said OGRA plays a pivotal role in regulating oil prices.

“However, the recent imposition of the Sindh Cess Tax has not been integrated into the existing price mechanism formula. As a consequence, this tax is substantially eroding the margins of Oil Marketing Companies.”

The burden of the tax is exacerbating the challenges faced by OMCs, who are already grappling with survival in an intensely competitive industry. The lack of an inclusion mechanism for the tax in the pricing formula has resulted in a significant portion of OMCs' margin being absorbed, according to OMAP chief.

“In light of these serious concerns and the importance of this matter to the OMCs, we respectfully request your [ State minister] intervention to instruct OGRA, being the regulatory body, to expeditiously address and resolve this issue without any delay,” Ali said.

OMAP letter stated that OMCs are burdened with heavy costs resulting from non-industry friendly policies imposed by OGRA. “Any further delay in addressing this issue will lead to additional devastation for the petroleum industry,” it warned.