ISLAMABAD:
The plan to implement deregulation of Inland Freight Equalization Margin (IFEM) on petroleum products is in jeopardy as political parties have strongly opposed the scheme and emphasized to link it with de-regulation of electricity prices.
At present, the government allows oil marketing companies (OMCs) to charge equal rate of IFEM on petroleum products in regulated mechanism. After de-regulation of IFEM, oil prices will vary in different parts of the country according to distance from depots. According to working on impact of deregulation of IFEM based on prices effective in the month of May 2011, the prices of petroleum products would increase up to Rs4.76 per litre in Northern Areas and decline up to Rs4.12 per litre in some parts of the country following deregulation of IFEM.
The government has already implemented a plan of deregulating prices of petroleum products except kerosene oil effective from June 1, 2011. The Economic Coordination Committee (ECC) has also approved controlled deregulation of IFEM. However, the decision has not been implemented so far and the oil sector has been agitating to implement it.
Sources told The Express Tribune that opposition party Pakistan Muslim League (PML-N), government-allied Awami National Party (ANP) and Jamiat Ulm-e-Islam (JUI) had registered their protest in meetings of Parliamentary Committee on Oil Pricing (PCOP) and strongly opposed implementation of deregulation of IFEM as it would result in different prices across the country.
These political parties argue that the government should also de-regulate prices of electricity if it wants to implement plan of deregulating IFEM on petroleum products.
According to the working, once the IFEM is deregulated, the price of petrol would increase by Rs3.40 per litre in Chitral, Rs2.51 per litre in Gilgit, Rs2.63 per litre in Kharian and Lala Moosa, Rs.06 per litre in Sheikhpura, Rs1.23 per litre in Faisalabad, Rs0.65 per litre in Vehari Punjab and Rs0.55 per litre increase Quetta.
Due to de-regulation, however, the price of petro will decline by Rs4.12 per litre in Karachi, Rs1.19 per litre in Shikarpur, Rs4.12 per litre in Mahmood Kot, Rs4.12 per litre in Islamabad, and Rs1.03 per litre reduction in petrol price in Peshawar.
Sources said that the Ministry of Petroleum had also prepared a summary to seek approval of ECC to raise margins of OMCs and dealers by 50 paisa per litre on petrol and HSD. OMCs are currently charging fixed margins on petrol and diesel by Rs 1.50 per litre and Rs1.35 per litre respectively.
Petroleum dealers are getting fixed margins of Rs1.50 per litre on diesel and Rs1.87 per litre on petrol. The sources maintained that dealers had demanded to restore the mechanism of charging margins in percentage which was turned down by the Ministry of Petroleum. In another development, the ministry has agreed to restore incidental charges only on imports of petroleum products.
Published in The Express Tribune, June 24th, 2011.
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