Fuel transportation formula revised by ECC
The government has abandoned its eighteen-year old petroleum product transportation formula in a bid to curb misuse.
ISLAMABAD:
The government has abandoned its eighteen-year old petroleum product transportation formula in a bid to curb misuse, but as a result petroleum products would now be costlier in upper parts of the country.
The Economic Coordination Committee (ECC) of the Cabinet, headed by Finance Minister Hafeez Shaikh, on Thursday decided to abolish the inland freight equalization margin formula, adopted in 1992. It deregulated the transportation cost of diesel and petrol. From today onwards, diesel and petrol prices would be comparatively lesser in southern and central parts of the county as against to prices in the north, especially in Khyber-Pakthunkhwa, Kashmir and Gilgit-Baltistan.
The ECC took this decision on the recommendations of the Baghwandas Commission Report which was constituted by the Supreme Court to re-examine the pricing formula. The ECC did not touch the other elements of the recommendations and sought additional information from the Petroleum Ministry.
It is claimed that some oil marketing companies were misusing the formula by dumping petrol and diesel in the southern parts of the country and claiming freight for the north.
According to a former official of Petroleum Ministry, the decision to abandon the equalization formula can have far reaching effects. “Now Khyber-Pakthunkhwa could demand cheap electricity by claiming that hydel is the cheapest source of electricity generation,” he commented.
It was not immediately clear what would be the status of the PARCO pipeline tariff, as the government used to pay the tariff to the oil refineries by getting the money from the pool of inland freight equalization margin.
The ECC also approved the revised investment criteria for the establishment of new Oil Marketing Companies by bringing it back to the March 2006 level under which for establishment of an OMC an investment of Rs500 million and equity of Rs100 million would be needed.
The government also enhanced the credit limit for farmers on agriculture land by increasing the per unit value. It raised the present value of the Produce Index Unit (PIU) from Rs1,200 to Rs2,000.
The ECC also decided to allow M/s Swede Bus Company to sell their 32 air-conditioned buses that were imported for Karachi under the Prime Minister’s Urban Transport Strategy Plan 1999 but then impounded as the company had ceased its operations.
The government alsoi approved the broader guidelines for declaring an industry as a pioneer industry. A pioneer industry would be entitled to tax relief. According to the ECC guidelines, the concept of “pioneer industry” shall not be associated with reference to the product rather it would be linked to the technology to be used. The status would be granted only to the corporate entities and the existing industry would be exempted from the status.
The pioneer industry would be least dependent on imports. The industry would have “Vertical Integration” with another local industry: either the product manufactured would be consumable for the local industry or the pioneer industry would itself use locally manufactured inputs. The pioneer industry would be foreign exchange neutral. The ECC also approved the transportation of urea fertilizer from the Gwadar Port at a cost of Rs 96.90 per bag. The ECC did not find any irregularity in urea import and gave ex-post facto approval for up country transportation.
Once again, the LNG import project was not approved. The Petroleum Ministry itself withdrew its summary after failing to answer the members’ queries. The ministry tabled two separate proposals for import of 4.5 million tones Liquefied Natural Gas. The Ministry of Petroleum and Natural Resources had recommended to the ECC to award a contract of integrated Mashal LNG project to ‘4Gas’ and French firm GDF Suez for supply of 3.5 million tons of LNG. A separate contract of one million tones short term supply was also tabled but withdrawn. A consortium of Vitol-Fauji Foundation is proposed to supply one million tons of LNG.
The ECC is again taking up the import proposal after the intervention of the Supreme Court. A local newspaper had alleged irregularity in the import contract, earlier awarded to GDF Suez. However, nothing could be proven against the Ministry of Petroleum and Natural Resources.
Published in The Express Tribune, July 2nd, 2010.
The government has abandoned its eighteen-year old petroleum product transportation formula in a bid to curb misuse, but as a result petroleum products would now be costlier in upper parts of the country.
The Economic Coordination Committee (ECC) of the Cabinet, headed by Finance Minister Hafeez Shaikh, on Thursday decided to abolish the inland freight equalization margin formula, adopted in 1992. It deregulated the transportation cost of diesel and petrol. From today onwards, diesel and petrol prices would be comparatively lesser in southern and central parts of the county as against to prices in the north, especially in Khyber-Pakthunkhwa, Kashmir and Gilgit-Baltistan.
The ECC took this decision on the recommendations of the Baghwandas Commission Report which was constituted by the Supreme Court to re-examine the pricing formula. The ECC did not touch the other elements of the recommendations and sought additional information from the Petroleum Ministry.
It is claimed that some oil marketing companies were misusing the formula by dumping petrol and diesel in the southern parts of the country and claiming freight for the north.
According to a former official of Petroleum Ministry, the decision to abandon the equalization formula can have far reaching effects. “Now Khyber-Pakthunkhwa could demand cheap electricity by claiming that hydel is the cheapest source of electricity generation,” he commented.
It was not immediately clear what would be the status of the PARCO pipeline tariff, as the government used to pay the tariff to the oil refineries by getting the money from the pool of inland freight equalization margin.
The ECC also approved the revised investment criteria for the establishment of new Oil Marketing Companies by bringing it back to the March 2006 level under which for establishment of an OMC an investment of Rs500 million and equity of Rs100 million would be needed.
The government also enhanced the credit limit for farmers on agriculture land by increasing the per unit value. It raised the present value of the Produce Index Unit (PIU) from Rs1,200 to Rs2,000.
The ECC also decided to allow M/s Swede Bus Company to sell their 32 air-conditioned buses that were imported for Karachi under the Prime Minister’s Urban Transport Strategy Plan 1999 but then impounded as the company had ceased its operations.
The government alsoi approved the broader guidelines for declaring an industry as a pioneer industry. A pioneer industry would be entitled to tax relief. According to the ECC guidelines, the concept of “pioneer industry” shall not be associated with reference to the product rather it would be linked to the technology to be used. The status would be granted only to the corporate entities and the existing industry would be exempted from the status.
The pioneer industry would be least dependent on imports. The industry would have “Vertical Integration” with another local industry: either the product manufactured would be consumable for the local industry or the pioneer industry would itself use locally manufactured inputs. The pioneer industry would be foreign exchange neutral. The ECC also approved the transportation of urea fertilizer from the Gwadar Port at a cost of Rs 96.90 per bag. The ECC did not find any irregularity in urea import and gave ex-post facto approval for up country transportation.
Once again, the LNG import project was not approved. The Petroleum Ministry itself withdrew its summary after failing to answer the members’ queries. The ministry tabled two separate proposals for import of 4.5 million tones Liquefied Natural Gas. The Ministry of Petroleum and Natural Resources had recommended to the ECC to award a contract of integrated Mashal LNG project to ‘4Gas’ and French firm GDF Suez for supply of 3.5 million tons of LNG. A separate contract of one million tones short term supply was also tabled but withdrawn. A consortium of Vitol-Fauji Foundation is proposed to supply one million tons of LNG.
The ECC is again taking up the import proposal after the intervention of the Supreme Court. A local newspaper had alleged irregularity in the import contract, earlier awarded to GDF Suez. However, nothing could be proven against the Ministry of Petroleum and Natural Resources.
Published in The Express Tribune, July 2nd, 2010.