Fuel prices may be slashed by 17%

Prices of petrol could be cut by Rs7.56 per litre (9.9 per cent), bringing it down from Rs76.25 to Rs68.69

ISLAMABAD: Pakistani consumers are hoping to reap some dividends from falling international oil prices in the wake of the US lifting sanctions against Iran, with the government expected to slash domestic retail prices of petroleum products by up to 17 per cent for February 2016.

“As per my personal assessment it, (the price) can be [cut] by more or less Rs5, and it is not final at all,” Petroleum Minister Shahid Khaqan Abbasi told a National Assembly panel in Islamabad on Thursday.



However, sources in the petroleum ministry have suggested that the cut could be bigger.

According to a proposal forwarded to the finance ministry by the Oil and Gas Regulatory Authority (Ogra), prices of petrol could be cut by Rs7.56 per litre (9.9 per cent), bringing it down from the current level of Rs76.25 to Rs68.69.

High-speed diesel, used mainly by the transportation industry and farmers, would see its prices cut by Rs11 per litre (13.6 per cent), from Rs80.79 per litre to just Rs69.79 per litre. Light diesel oil, an industrial fuel, would see its prices drop by Rs7.36 per litre (16.4 per cent) from Rs44.94 to Rs37.58 per litre.

The prices of High-Octane Blended Component (HOBC), a fuel for luxury cars, would see its prices decline to Rs70.51 from Rs 80.66 per litre.

Kerosene oil, a fuel used for cooking and lighting by the poorest parts of Pakistan, would see its prices slashed by Rs8.17 per litre (16.9 per cent) from Rs48.25 per liter to Rs40.08 per litre.

While the prime minister is the final arbiter on the changing fuel prices, Finance Minister Ishaq Dar has been resisting attempts in recent months to slash fuel prices even as international prices hit rock bottom at $26. Instead, he has balanced the cut in fuel prices with hikes in temporary taxes as a means to boost government revenue and to manage the fiscal deficit. Over 25 per cent of all government revenues come from the energy sector.



In the NA Standing Committee on Petroleum and Natural Resources, Abbasi argued that despite the government’s resistance to follow the international market on fuel prices, Pakistan was one of the foremost oil importing countries to reduce prices for domestic consumption.

“Petrol price in Pakistan is Rs76 as compared to 96 and 125 in India and Bangladesh respectively,” he pointed out.

Since prices began to fall in the international market, he said, the government had passed it on to consumers, slashing fuel prices by as much as Rs40.

In addition to a cut in major petroleum products, the government has been recommended to lower prices of jet fuels, used by airlines, by as much as 20.9 (JP-1), 19.6 (JP-4) and 21.1 (JP-8) per cent.

Gas

Abbasi said that the country was facing severe gas shortage, especially in the winter season and that the government was bridging the ever-increasing gap between demand and supply of the commodity through load-management in Punjab – the only place where gas was being curtailed.



Oil and Gas Development Company (OGDCL) MD Zahid Mir told the committee that the company owned seven oil and gas rigs.

He added that the company was not in favour of buying additional rigs citing maintenance expensive, rather it was adopting an international practice of getting the job done through contractor rigs.

Mir added that OGDCL rigs, which can drill between 2,500 and 5,500 meters, were usually deployed in sensitive areas where contractors are not allowed to operate.


Published in The Express Tribune, January 29th, 2016.