Petroleum products: Decision on deregulating freight margin withdrawn

Strong opposition from political parties forces ministry to abandon the move.

Zafar Bhutta August 12, 2011


The government has decided to withdraw the decision on deregulating inland freight equalisation margin (IFEM) on petroleum products, a move that would have led to different oil prices across the country, after facing strong opposition and criticism of political groups.

Different political parties including Pakistan Muslim League-Nawaz (PML-N) and Awami National Party (ANP) had pressed the government that if it wanted to deregulate IFEM, then it should also deregulate electricity tariffs.

The Economic Coordination Committee (ECC) of the cabinet had approved deregulation of road and rail components of IFEM on July 1, 2010 and deregulation of petroleum product prices on October 15, 2010 with directives to the authorities concerned to implement these at an appropriate time.

Prices of petroleum products including motor spirit or petrol, high octane blending component (HOBC), light diesel oil (LDO) and aviation or jet fuels have been deregulated since June 1, 2011 as per formula approved by ECC on October 15, 2010.

However, sources said, the Ministry of Petroleum in a summary asked ECC to revert its decision on deregulation of road and rail components of IFEM due to stiff opposition from parliamentarians, especially those from Khyber-Pakhtunkhwa.

The parliamentarians showed resentment over the move in meetings of a committee constituted by the prime minister for review of petroleum product prices.

Keeping in view the concerns of parliamentarians, the petroleum ministry undertook a review and recommended withdrawing the decision on IFEM deregulation, sources said while quoting the summary of the ministry.

At present, the government allows oil marketing companies (OMCs) to charge uniform prices for petroleum products in a regulated mechanism. After deregulation, oil prices were supposed to vary in different parts of the country according to distance from depots.

According to a study on the impact of deregulation of freight margin, the prices of petroleum products were projected to increase up to Rs4.76 per litre in northern areas and decline up to Rs4.12 per litre in other areas and parts of the southern region.

In the northern region, the price of petrol was expected to rise by Rs3.40 per litre in Chitral, Rs2.51 in Gilgit, Rs2.63 in Kharian and Lala Moosa, Rs1.06 in Sheikhupura, Rs1.23 in Faisalabad, Rs0.65 in Vehari and Rs0.55 in Quetta.

In other areas, the price of petrol was projected to decline by Rs4.12 per litre in Karachi, Rs1.19 in Shikarpur, Rs4.12 in Mahmood Kot, Rs4.12 in Islamabad and Rs1.03 in Peshawar.

Published in The Express Tribune, August 13th, 2011.

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