Petroleum prices: MoP summary to ECC recommends de-regulation

ISLAMABAD (October 12 2010): The Ministry of Petroleum has moved a summary to the Economic Co-ordination Committee (ECC) of the Cabinet, recommending de-regulation of petroleum prices, in spite of concerns raised by the Senate standing committee on petroleum, sources told the Business Recorder.Deregulation of petroleum prices will allow oil refineries and the oil marketing companies (OMCs) to fix prices on monthly basis, instead of Oil and Gas Regulatory Authority (Ogra) which currently regulates the prices of petroleum products on monthly basis.Senate body on petroleum in its meeting on October 4, 2010 had expressed serious concerns over the proposed de-regulation of all petroleum product prices and had sought an explanation from the Ministry of Petroleum During the meeting, Senator Safdar Abbasi was critical of de-regulation of petroleum prices and expressed concern that it might result in putting consumers at the mercy of the oil refineries and the OMCs. However, new Secretary, Petroleum, Imtiaz Qazi assured the committee that he would arrange a separate meeting to brief the committee on the proposed de-regulation price mechanism.

“Without briefing the Senate standing committee on petroleum as promised, Minister for Petroleum Naveed Qamar decided to move a summary to the ECC, recommending de-regulating prices of petroleum products, which would put the consumers at the mercy of oil refineries and OMCs, as is happening in the case of deregulation of pricing mechanism of liquefied petroleum gas (LPG), sources said.

The ECC in its meeting held on July 29, 2010 had constituted a committee, under the chairmanship of Deputy Chairman of Planning Commission, with representatives from the Ministry of Petroleum and Ogra, to develop consensus on possibility of deregulation of inland freight equalisation margin (IFEM). The former was supporting deregulation while the latter argued that after deregulation, ex-depot price of petrol would rise, ranging from Rs 2.06 to Rs 12.19 per litre across the country.

The Ministry of Petroleum and Ogra have reached a consensus on de-regulating IFEM, sources added. The Ministry of Petroleum has pointed out in its summary that the objectives of deregulation of petroleum products are: (i) to enhance efficiency, transparency and remove distortion in the pricing especially MS (petrol); (ii) to eliminate price differential claim (PDC) burden on the government of Pakistan which is possible when refineries (NRL, PRL, ARL and Byco) would increase the MS price to match PSO import price; and (iii) to enable Parco to reduce MS price, which would remove the element of price differential between Parco and the rest of the system.
The ECC has been recommended to continue 7.5 percent deemed duty on high speed diesel (HSD) as Petroleum Minister Naveed Qamar had strongly opposed its elimination which Rukhsana Zuberi, one of the petitioners in Supreme Court and member of the oil/economic expert committee on review of pricing formula, had challenged – Brecorder