Effect of declining oil prices: Parliamentary panel asks CCP to review pricing formula

Suspects govt has not fully passed on impact to end-consumers.

ISLAMABAD: As oil prices tumble in the international market requiring significant cut in power tariffs and petroleum products, a parliamentary panel has asked the anti-trust watchdog to review the price-fixation formula. The panel suspects that the government has not fully passed on the impact to end-consumers.

The Senate Standing Committee on Finance directed the Competition Commission of Pakistan (CCP) that a detailed review should be carried out to determine the government’s claim whether it was fully passing on the reduction in oil prices to the domestic consumers. The meeting was chaired by Senator Osman Saifullah Khan of PPP.



The committee’s directions came days before the government is expected to further cut the petroleum products prices for the consecutive second month. For the current month, the government approved the ex-depot price of petrol at Rs94.19 per litre, slashing it by Rs9.43 or 9.1% and high speed diesel prices were also cut by 5.7% or Rs6.18 to Rs101.21 per litre.

The members of the standing committee were of the view that despite significant reduction in oil prices globally; the government was not fully passing on the impact to domestic consumers. However, the acting chairman CCP, Joseph Wilson, was reluctant to undertake the assignment. “It is the job of the Oil and Gas Regulatory Authority to determine the prices,” he said.

The CCP Act of 2010 authorises the anti-trust watchdog to review the prices of various products being sold in the country.



The price of oil has plummeted by more than a quarter since June this year after the US discovery of shale oil and gas that has started threatening the monopoly of oil producing countries, represented by the Organisation of the Petroleum Exporting Countries (OPEC).

So far, the government has cut the power rates by only 48 paisa on account of fuel price adjustments, denying the due benefits to consumers.

Another inquiry

Meanwhile, the anti-trust watchdog has launched a formal inquiry against collusion in fixing rates for advertisements, revealed the CCP’s acting chairman. He said the inquiry was part of four investigations that the CCP was undertaking.

Wilson said the CCP did not issue any notice so far. He said the inquiry was at an initial stage and the organisation has not yet reached a conclusion.

The standing committee showed its dissatisfaction over the working of the CCP, as the watchdog has been rendered a toothless body. Mueen Batlay, member competition policy, cartels and trade abuses, said in the last seven years, the CCP imposed Rs26.7 billion fines on violation of competition law but the recoveries remained only Rs1.8 million.

The legal system was the biggest obstacle in the working of the CCP, as the parities take stay orders against its decisions, said Batlay. He said the government did not set up appellate tribunals for hearing appeals against the decisions of the CCP, which also made the body dysfunctional.

The CCP has proposed amendments in the Competition Commission Act, suggesting the government to replace appellate tribunals with appeal only in the Supreme Court of Pakistan. The proposal is aimed at discouraging the practice of seeking stay orders from the lower courts. Interestingly, it was Finance Minister Ishaq Dar who, as member of the Senate standing committee on finance, opposed the proposed right to appeal only in the Supreme Court.

Published in The Express Tribune, November 27^th, 2014.

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