Deregulation of Petroleum prices to affect Chitral

Chitral -- The proposal to deregulate petroleum prices across the country will cause an increase in the price of High speed diesel by Rs 2.88 and Petrol by Rs 1.5 in Chitral District, while the price in big cities would reduce. A report on the subject published in Daily Dawn is reproduced below: --(CN report, 19 June 10)

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ISLAMABAD: The government has decided to deregulate the prices of all petroleum products with an improved monitoring role for the Oil and Gas Regulatory Authority, abolish guaranteed inland freight equalisation margins (IFEM) to refineries and marketing companies and disallow a 7.5 per cent deemed duty on diesel to the refining industry.

According to government estimates, these measures will result in the reduction of prices of major oil products, including diesel and petrol, by an average of Rs2 per litre across the country, except in Gilgit and Chitral.

According to an official, the move will also meet a directive of the Supreme Court that consumers be provided relief by removing lacunae in the oil pricing mechanism.

The decisions are likely to be approved by the Economic Coordination Committee (ECC) of the cabinet next week.

However, sources said that some powerful lobbies with vested interests were still opposing the move and using their local and foreign influence to protect a part of the IFEM.

The sources said that the decisions were reached last week at a meeting presided over by Petroleum Minister Syed Naveed Qamar and attended by officials and former PPP senator Rukhsana Zuberi.

The meeting decided to withdraw two earlier summaries submitted to the ECC and opposed by Ogra and Ms Zuberi for violating Justice Rana Bhagwandas Commission’s report and being unfair towards consumers.

According to the sources, some officials of the petroleum ministry opposed withdrawal of 7.5 per cent deemed duty, saying the move would hit the refineries on diesel prices.

The petroleum minister and Ms Zuberi argued that they could not defend giving favours to a select group at the cost of the wider population while the media was already highlighting the issues.

They were of the view that profitability of the refining and marketing industry should be seen in the overall context of the entire production line, including lubricants and other products, and not on the basis of individual products.

The meeting decided to deregulate the prices of all products, including petrol, kerosene, diesel, jet fuels and high octane blending component, empower Ogra to intervene in case of price manipulation by any company and ensure that all marketing companies got supplies from refineries in accordance with their market share.

The participants also reached a consensus on abolition not only the freight margin for rail and road movement of products, but also the pipeline component of the IFEM.

The Bhagwandas Commission had recommended that the IFEM be replaced by a primary charge in the ex-depot price and Parco’s pricing be brought in line with other refineries.

One of the participants observed that even if the refineries claimed suffering losses after the deregulation, state-owned companies like the PSO, the OGDC and the PPL could be encouraged to purchase them for diversifying their business.

However, the proposal did not get a wider support.

A decision regarding sale of high speed diesel of 0.05 per cent content (Euro-II specification) was postponed to provide an opportunity to the refineries to absorb removal of deemed duty. Currently, the consumers are charged for the HSD at the rate of 0.5 per cent sulphur content, but the product supplied is of one per cent sulphur content.

The price difference between the two products is around $30 a barrel and translates into an annual loss of about Rs20 billion to consumers.

Official calculations suggest that after complete abolition of the freight margin, the price of HSD in Karachi will decrease by Rs1.84 per litre and of petrol by Rs3.22.

In Chitral, the price of HSD will increase by Rs2.88 and that of petrol by Rs1.5.

Consumers in all big cities will benefit because the prices at nine out of the 12 depots will reduce by 17 paisa to Rs1.84 for HSD and 72 paisa to Rs3.22 for petrol.

The price of HSD at Juglot, serving Gilgit-Baltistan will increase by Rs2.14 and of petrol by 76 paisa.

The diesel price in Quetta will increase by 21 paisa, but petrol price will decrease by 72 paisa.

The diesel prices will decrease by Rs1.14 per litre in Shikarpur, 73 paisa in Multan (Mehmoodkot), 17 paisa in Vehari, 37 paisa in Faisalabad, 38 paisa in Lahore (Machike), 66 paisa in Jhelum, Rs1.14 in Rawalpindi and Islamabad and 62 paisa in Peshawar (Tarujabba).

The government believes that removal of freight margin will lead to competition among marketing companies and refineries to use the cheapest mode of transportation and result in lower consumer prices. It would also curb malpractices related to tax refunds, sale of fake products and dumping, the sources said. --(Dawn)

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