Oil companies are selling substandard fuel as high-octane for profits

high octane

To deceive customers and increase profits, several oil marketing companies (OMCs) in Pakistan have been selling research octane number (RON)-95 fuel as high-octane blended component (HOBC) RON-97 fuel.

The price of RON-92, a standardized import gasoline, is controlled and announced by the government. It was connected to the petroleum charge and sales tax, which were lowered to practically nothing after the government promised that fuel prices would remain unchanged until the new budget, according to an official.

The price of RON-95 and RON-97 has been privatized, and OMCs can now establish their own prices. RON-97 is subject to a Rs. 30 fuel surcharge and a 17.5% GST, while RON-95 is taxed similarly to RON-92.

Read more: Rs 20 billion proposed for paying price differential to Oil Marketing Companies

A major importer of RON-97 stated that a competitor was importing RON-95 and reselling it as RON-97 to avoid paying taxes. After failing to get the government’s attention, the accusing OMC began importing RON-95 and selling it as RON-97.

More OMCs Deceiving Consumers

In most nations, RON-97 or above is labelled ‘high-octane blended component (HOBC),’ but RON-95 was sold as HOBC in Pakistan under various brand names.

Because RON-97 for HOBC is privatized, OMCs can sell the fuel at whatever price they want. The government has set the petroleum development levy at Rs. 30 per litre and the whole sales tax rate at 17%, claiming that owners of luxury SUVs or sports cars, which can cost millions of rupees, should pay more for premium fuel.

This resulted in an anomaly in the case of HOBC RON-95, which was mislabeled as RON-97 by some OMCs.

Because this is a deregulated product, OMCs demand a high premium for it and invest much in marketing campaigns to attract customers.

According to the official, a well-known OMC followed the RON-95 pattern and offered a substandard product to customers while also incurring a government deficit.

Every year, Pakistan sells approximately 200 million litres of HOBC (RON-95 and RON-97), with a petroleum development levy of Rs. 6 billion to be paid at a rate of Rs. 30 per litre.

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