By SKM
April 14, 2026
ISLAMABAD: Pakistan’s downstream petroleum sector is coming under mounting financial pressure amid a controversial shift in the diesel pricing formula and continued delays in the settlement of Price Differential Claims (PDCs), with industry leaders warning that the combined impact is creating serious liquidity constraints and potential risks for fuel supply stability.
The Oil Companies Advisory Council (OCAC), in a letter to Federal Minister for Energy (Petroleum Division) Ali Pervaiz Malik dated April 13, has flagged what it describes as a growing “systemic stress” in the sector. The council said two concurrent developments — a revised High-Speed Diesel (HSD) pricing mechanism and delayed regulatory reimbursements — are placing oil marketing companies (OMCs) under considerable financial strain at a time when they are already operating under tight regulatory margins.
At the center of the dispute is the government’s decision to revise the HSD pricing benchmark from the average FOB Platts (Arab Gulf) quotation to the lowest quotation within the pricing window. While the move is seen as an attempt to improve pricing efficiency and pass on benefits to consumers, the OCAC has strongly challenged its practicality, arguing that it fails to reflect actual import procurement dynamics.
According to the industry body, petroleum imports are not executed at isolated low-price benchmarks but through tender-based systems influenced by cargo availability, shipping schedules, and transaction timing. These factors, it says, align procurement costs more closely with average market levels rather than the lowest recorded quotation. The council warns that this mismatch is already resulting in inventory losses for companies, as fuel purchased at higher international prices is now being sold at lower regulated prices after price adjustments.
The OCAC has cautioned that this pricing distortion is eroding the sector’s ability to absorb market volatility. It argues that in a regulated environment where marketing margins are already limited, such gaps between procurement cost and benchmark pricing can quickly translate into working capital stress, affecting operational planning and import continuity. The council has urged authorities to reconsider the revised methodology and revert to an average-based pricing system, alongside a transparent import premium applicable across the industry.
In a parallel concern, the OCAC has also highlighted significant delays in the disbursement of Price Differential Claims (PDCs), which are meant to compensate oil marketing companies for government-mandated pricing adjustments. The issue stems from a mechanism introduced by the Oil and Gas Regulatory Authority (OGRA) on March 17, 2026, which requires such payments to be made within two days of claim submission. However, the industry says this timeline is not being met, with payments delayed and in some cases only partially released.
The council has provided a breakdown of pending claims, showing approximately Rs23 billion outstanding for March 14–20, Rs48 billion for March 21–27, and Rs57 billion for March 28–April 2. This takes the total unpaid amount to around Rs128 billion, which the OCAC describes as a substantial working capital exposure for the downstream petroleum sector. While 90 percent of the first tranche has reportedly been released, the remaining 10 percent is still withheld, with additional delays arising from evolving documentation requirements and proposed reconciliation with the Federal Board of Revenue (FBR), a process that could take up to two months.
Industry representatives warn that these delays are severely disrupting cash flows in a sector that depends on continuous financing to fund imports, manage inventories, and maintain nationwide fuel distribution. With marketing margins tightly regulated, companies argue they have little capacity to absorb either sustained payment delays or inventory-related losses of this magnitude.
The OCAC has warned that the situation is no longer limited to financial strain within individual companies, but is increasingly becoming a broader risk to the stability of the country’s fuel supply chain. It says the ability of oil marketing companies to continue importing and distributing fuel is now critically dependent on the timely restoration of liquidity and the establishment of a predictable regulatory framework.
The council has urged the Ministry of Energy to immediately review the revised pricing formula, ensure prompt settlement of all pending PDCs in line with OGRA’s prescribed timelines, and avoid additional withholding or procedural delays. It has also called for improved transparency and predictability in both pricing and reimbursement mechanisms, and has sought an urgent meeting with the ministry to address the escalating concerns.
Pakistan’s petroleum pricing system, which tracks international benchmarks while aiming to shield consumers from volatility, has long faced criticism over timing mismatches between procurement costs, regulatory price adjustments, and reimbursement flows. The latest warning from the OCAC highlights these structural tensions once again, with industry stakeholders cautioning that unresolved gaps could deepen financial stress across the downstream sector and eventually impact supply stability. Ends
