Pakistan’s fuel pricing system has come under fresh scrutiny after the Federal Investigation Agency (FIA) raised serious concerns about the mechanism used to compensate oil marketing companies (OMCs) during recent fluctuations in petroleum prices.
An interim inquiry report prepared by FIA’s Anti-Corruption Circle in Karachi has described the current price differential compensation framework as deeply flawed, arguing that the process may have enabled certain companies to receive payments beyond their actual financial exposure.
Why the Compensation Mechanism Was Introduced
The government introduced the price differential compensation arrangement to shield consumers from sudden increases in global oil prices. Under this system, OMCs were reimbursed for losses they claimed to have incurred when regulated retail fuel prices remained lower than international market rates.
The intention was to prevent supply disruptions and maintain stability in the domestic petroleum market during periods of rising crude oil prices.
However, investigators now believe the formula used to calculate these payments may have opened the door to misuse.
FIA Raises Questions Over “Faulty” Formula
According to the FIA’s interim findings, compensation payments were reportedly calculated on the basis of fuel sales volumes rather than the actual cost at which petroleum products were purchased.
The agency argues that this approach ignored an important factor: existing inventories.
Many OMCs already had petroleum stock purchased earlier at lower prices before international rates increased. Despite this, the compensation mechanism allegedly allowed companies to claim reimbursement on fuel sold from these cheaper inventories.
Investigators also stated that imported fuel acquired before the price hikes may have been included in compensation calculations, even though those supplies were not affected by the later increase in refinery or import costs.
The FIA described the system as “irrational” and suggested that weak verification procedures may have contributed to the problem.
Concerns Over Oversight and Verification
The inquiry points toward possible shortcomings in the role played by regulatory authorities.
According to the report, officials responsible for monitoring claims allegedly failed to properly verify:
- inventory positions,
- refinery purchase records,
- and import timelines.
The FIA also hinted at possible coordination issues between the Oil and Gas Regulatory Authority (OGRA) and the Petroleum Division, suggesting that the framework itself may have encouraged hoarding or manipulation of sales data.
Investigators believe compensation should have been tied directly to refinery purchases and actual import costs rather than overall sales figures.
Companies Allegedly Claimed Millions Without Fresh Purchases
One of the most notable observations in the report concerns two unnamed oil marketing companies.
The FIA claims that during the first compensation period between March 14 and March 20, 2026, these companies neither imported fuel nor purchased petroleum products from local refineries. Despite this, they allegedly received compensation claims worth approximately ₨15.6 million and ₨15.9 million.
The agency further stated that several firms may have obtained payments significantly higher than the financial impact they actually faced during the period under review.
Industry Perspective
Oil marketing companies have long argued that petroleum pricing in Pakistan is based on international replacement costs. From their perspective, inventory gains during rising markets are often balanced by losses when prices decline.
Industry representatives also maintain that delayed compensation payments can create cash flow pressures and threaten fuel supply continuity.
Still, the FIA inquiry has intensified public debate over whether the compensation structure was transparent and fair.
Legal Challenge Halts Inquiry
The investigation is currently on hold after one oil marketing company approached the Sindh High Court and challenged the FIA proceedings.
For now, the report remains an interim assessment based on initial interviews, interrogations, and financial reviews conducted over eight days.
No final conclusions have been officially reached, and no company or official has yet been proven guilty in court.
A Larger Question for Pakistan’s Energy Sector
The controversy highlights broader concerns about governance, accountability, and transparency in Pakistan’s petroleum sector.
As fuel prices continue to influence inflation and economic stability, policymakers may now face increasing pressure to redesign compensation mechanisms in a way that protects consumers without creating opportunities for abuse.
The outcome of the FIA inquiry — and any future reforms that follow — could shape how Pakistan manages fuel pricing crises in the years ahead.