Oil marketers may set fuel prices

Energy minister to hold a meeting in this regard on order of PM Shehbaz

ISLAMABAD:

The PML-N led federal government has decided to deregulate the prices of petroleum products, allowing oil marketing companies (OMCs) to set the prices based on various factors including demand and supply.

According to a notification issued by the Ministry of Petroleum on Wednesday, the federal energy minister is going to hold a meeting in this regard today (Thursday) in view of an office order issued by Prime Minister Shehbaz Sharif.

In the office order, the PM had instructed the Petroleum Division to finalize and present the deregulation framework for the petroleum sector.

The Oil and Gas Regulatory Authority (Ogra)—the fuel regulator—will present an analysis as well as implications and a way forward for deregulation of petroleum products. Official sources revealed that the OMCs are likely to be delegated the authority to set prices in a phased manner.

They said the Ogra chairman has been instructed to assess the effects of deregulating prices and to develop an implementation plan. The final framework for deregulating petroleum product prices will be presented to the prime minister.

Reacting to the move, the Pakistan Petroleum Dealers Association (PPDA) said it supported the decision of the prime minister to end the government's intervention in the determination of oil prices. However, the association said, Ogra should set petroleum product prices and not the OMCs.

"Ogra is well suited to protect the interests of all stakeholders and consumers in a professional manner, said PPDA spokesperson Hassan Shah in a statement issued on Thursday. He said fiving the authority to determine the oil price to the OMCs was like "throwing consumers to the wolves".

"The political government should stop setting the oil prices, as this will prevent it from facing public criticism for inflating the cost of oil in the country following an increase in its price on the international market.

"The government also incurs losses due to fluctuations in oil prices; the only solution is for the government to completely end its intervention in this regard," he said.

Shah said devaluation of the local currency, appreciation of the dollar, or fluctuations in the price of oil on the global market will not affect the political government's reputation once its role in determining oil prices ends.

He said Ogra has the ability to determine oil prices in a professional manner, and petroleum dealers have no objection to it, although they have reservations about giving this authority to the OMCs

"The government should conduct a thorough study and evaluate the benefits and implications before making a decision.

"Pakistan's OMCs are already profiteering and do not miss any opportunity to earn illicit profits. Giving them more power will have disastrous consequences for the country's economy," he added.

At present, Ogra reviews and adjusts fuel prices on a fortnightly basis in view of the price calculations submitted by the OMCs. The regulator then forwards its recommendations to the Ministry of Energy (Petroleum Division) for approval.

The Ministry of Energy reviews Ogra's recommendations and, after consultation with the Ministry of Finance, decides on the final retail price. Once approved, the new prices are officially notified and come into effect immediately or from the specified date.