Oil marketing companies (OMCs) have raised objections over the proposed ‘take and pay’ clause in sales and purchase agreements (SPAs) with local refineries, warning that the move would place an unfair financial burden on them.

The development comes as petroleum product prices are expected to see a notable reduction later this week.

Massive drop in petrol and diesel prices?

According to the Oil Marketing Association of Pakistan (OMAP), petrol prices could fall by Rs12 per litre, while high-speed diesel (HSD) prices may see a cut of Rs8 per litre. The decline is attributed to international market trends and inventory adjustments.

In a letter addressed to the chairman of the Oil and Gas Regulatory Authority (OGRA), OMAP chairman Tariq Wazir Ali strongly opposed the new ‘take and pay’ clause, stating that it unfairly shields refineries from market fluctuations while placing the entire financial risk on OMCs.

Under the proposed mechanism, OMCs would be obligated to lift their allocated quota of petroleum products from local refineries or face financial penalties. OGRA had introduced the clause following complaints from refineries that excessive fuel imports were affecting domestic production, leading to underutilisation of refining capacity.

OMAP, however, argues that the new arrangement will disproportionately impact smaller OMCs, many of whom are already struggling with financial instability. The association also warned that the move could strengthen monopolies in the oil sector, reducing competition and discouraging new entrants.

The letter further highlighted concerns over refinery practices, alleging that refineries often withhold supply when prices are expected to rise—forcing OMCs to resort to costly imports—while offloading excessive stocks when prices are anticipated to drop, resulting in financial losses for OMCs.

Additionally, OMAP pointed out that cross-border smuggling of petroleum products continues to distort the market, making it difficult for locally sourced fuel to compete. The association called on OGRA to implement a regulatory framework that ensures fair market practices and prevents refineries from exploiting price fluctuations to their advantage.

OMAP urged OGRA to reconsider the ‘take and pay’ clause, arguing that without safeguards against refinery manipulation, the proposal would only exacerbate the financial difficulties faced by smaller OMCs and disrupt the overall petroleum supply chain.

Current petrol and diesel prices in Pakistan