OCAC accuses OGRA of price manipulation

Says authority disregarded ECC’s decisions resulting in detrimental impact on oil industry

ISLAMABAD:

The Oil Companies Advisory Council (OCAC) has launched a scathing attack on the Oil and Gas Regulatory Authority (OGRA), accusing it of manipulating the price of high-speed diesel (HSD) for the second fortnight of July by Rs7 per litre. According to OCAC, OGRA allegedly made unjust adjustments, deviating from the pricing formula, and disregarding the Economic Coordination Committee’s (ECC) decisions, leading to a detrimental impact on the oil industry.

In a strongly-worded letter addressed to the Chairman of OGRA, the OCAC contested the computation of HSD ex-depot price, stating, “Our understanding is based on the fact that over time some adjustments have been made which were not in line with pricing formula and were detrimental to the oil industry.”

The OCAC claimed that the IFRM (International Freight Rate Mechanism) was reduced by Rs3.21 and Rs2.72 per litre on petrol and HSD, respectively, while the exchange loss adjustment was decreased by Rs3.01 and Rs2.11 per litre on petrol and HSD, respectively. Moreover, the revision of oil marketing companies (OMCs) margin on motor fuels, which was approved by the ECC on October 31, 2022, was allegedly not incorporated in the prices.

Furthermore, OCAC criticised the treatment of the exchange rate in pricing, stating that the computation for August 1, 2022, used the average US exchange rate instead of the rate applicable on the last working day.

In response to OGRA’s alleged actions, the OCAC urgently requested a meeting with industry representatives to address the matter based on factual evidence, mitigate potential impacts on future pricing, and reach a mutually agreeable resolution.

The oil industry is deeply concerned about the repercussions of this price manipulation, especially considering the potential scarcity of HSD in the country. The OCAC believes that OGRA’s sole focus on price reduction is detrimental to the industry and consumers alike.

OGRA, on the other hand, defended its position through a press release, claiming that the petrol and diesel prices were strictly calculated according to the ECC-approved formula. They also clarified that the reduction of Rs9/ltr in petrol and Rs7/ltr in diesel prices on July 16, 2023, was in line with the ECC’s decisions.

The Ogra spokesperson dismissed the criticism as unfounded, stating it goes against federal government policy guidelines. As per the ECC decision, if PSO’s premium, freight, or incidentals from the previous fortnight are unavailable, the previous month’s incidentals will be used. In this case, PSO’s Diesel premium of $4.20/bbl, agreed upon with Kuwait Petroleum Company since May 29, 2023, was factored into the pricing. Ogra maintains that the assertions made by the oil industry regarding pricing and supply disruptions are baseless and unacceptable.

Published in The Express Tribune, July 20^th, 2023.

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