Deregulation to hit remote areas: Ogra
In Chitral, the price of HSD
will go up by Rs2.88 and that of petrol by Rs1.5
ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra)
has expressed concern over proposed deregulation of inland road
freight component of petroleum products saying this may lead to
shortages in rural areas and widespread price variations across
Ogra sources told Dawn that the government had been advised to
look into the issues of product supplies to remote areas because
the deregulation would be a disincentive for private marketing
companies to ensure their presence across the country. This may
fuel a competition among the companies which at times use
unhealthy business practices to grab larger market shares in
Secondly, consumers in remote areas will be at a disadvantage in
commercial activities because they will get petroleum products
at prices higher than in large commercial centres.
The sources said the government should provide subsidy on
petroleum products for remote areas or bind all marketing
companies to supply products to such areas in accordance with
their current market shares.
“Even though deregulation of road movement will contribute to
curbing misuse of inland freight equalisation margin (IFEM), it
will result in price variation throughout the country, which
will be particularly steep in case of far-flung areas and Khyber
Pakhtunkhwa. A stock maintenance issue may also arise,” the
sources quoted Ogra as telling the Economic Coordination
Committee (ECC) of the cabinet.
On PSO’s recommendation, the petroleum ministry has asked the
ECC to partially abolish the IFEM on petroleum products which
yields about Rs15 billion.
The move is likely to reduce diesel price in Karachi by about
Rs2 per litre and increase it by Rs3 in Kashmir and
The margin is charged on high speed diesel (HSD), petrol, high
octane blending component (HOBC), kerosene and light diesel oil
(LDO) to maintain their uniform prices across the country.
The sources said the consumers would benefit from the
deregulation only if the entire freight, including pipeline
freight and guaranteed freight to a couple of refiners, was done
away with and a portion of that made available to remote areas.
The petroleum ministry seeks to protect the IFEM for movement of
HSD through pipeline because of a tariff guarantee provided to
the White Oil Pipeline and a price differential guaranteed to
the Pak-Arab Refinery (Parco) and partially to the Attock
Refinery for its southern crude freight charges.
The ministry has contended that the freight charge was meant for
equalisation of transportation cost and not as a source of
profit for refineries and marketing companies.
According to the sources, the current mechanism was opaque and a
couple of refineries and marketing companies were using it for
The average transportation cost of refined product at current
prices is estimated at Rs1.2 per litre on high speed diesel. Of
this, 64 paisa goes to the two refineries as carrying cost from
well or port and the rest is shared by marketing companies for
transporting the product from refineries to 12 depots.
Of the Rs15 billion annual freight margin, about Rs5.95 billion
goes to Parco -- Rs3.7 billion on HSD and Rs2.26 billion on
Official calculations suggest that after abolition of the 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 go up by Rs2.88 and that of
petrol by Rs1.5. Consumers in all big cities will benefit
because the prices at nine of the 12 depots will decline by 17
paisa to Rs1.84 per litre for HSD and 72 paisa to Rs3.22 for
However, prices at two depots serving remote areas in Azad
Kashmir, Chitral and Gilgit-Baltistan will increase and
consumers will suffer if they are not subsidised directly on the
basis of consumption volume and transportation cost.
The price of HSD at Juglot in 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
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).
Petrol prices will decrease by Rs3.22 per litre in Karachi,
Rs1.66 in Shikarpur, 72 paisa in Quetta, Rs2.11 in Multan,
Rs1.55 in Vehari, Rs1.08 in Faisalabad, Rs1.64 in Lahore, Rs2.04
in Jhelum, Rs2.52 in Rawalpindi and Rs2 in Peshawar.
Petrol prices are likely to increase by Rs1.5 in Chitral and 76
paisa in Gilgit-Baltistan. . --(Khaleeq Kiani, 'Dawn', 10 May 2010).