Oil sector wants say in deregulation

OCAC cites negative impact of excluding private sector from consultation process

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ISLAMABAD:

The oil industry is concerned about the exclusion of private sector stakeholders from the consultation process intended to develop a roadmap and future strategy for deregulating Pakistan's downstream oil sector. They have called for the inclusion of these stakeholders in the entire process.

Chairman of the Oil Companies Advisory Council (OCAC), a body of refineries and oil marketing companies (OMCs), in a letter to the Petroleum Division secretary, drew attention towards a letter written on November 19, 2024 in which they requested the inclusion of major private sector stakeholders in the working group established to develop a roadmap for deregulating the downstream oil sector.

"We understand that the government is in the process of formulating a policy for the deregulation of petroleum product prices in the near future," he said, adding that it was concerning to note that private-sector refineries and OMCs, which played a pivotal role in the downstream oil industry, had not yet been included in the consultation process.

OCAC Chairman Adil Khattak said that it was critical to highlight that the industry was already facing challenges due to issues such as exemption from sales tax on petroleum products, the smuggling of petroleum products, delays in the revision of OMC margins, and other challenges that had repeatedly been emphasised.

"We strongly urge you to involve private-sector refineries and OMCs in the consultation process to ensure the development of a balanced and workable deregulation policy for the country," he said and warned that any unilateral decision on such a critical matter made in haste would have severe ramifications for the oil industry and could exacerbate the existing challenges.

Talking to The Express Tribune, Adil Khattak said that they had earlier also requested that major stakeholders of the private sector should be included in consultation for deregulation/ revision of the pricing mechanism of petroleum products but it went unheeded.

Refineries and OMCs are already facing a crisis due to the unwarranted exemption of petroleum products from sales tax in the Finance Act 2024, making not only normal operations unsustainable but also jeopardising the implementation of the Brownfield Refining Upgradation Policy.

While the sales tax issue remains unresolved in spite of numerous meetings and directives of the prime minister and the Special Investment Facilitation Council (SIFC), taking up revision of petroleum products' pricing mechanism at this stage is ill-timed.

Also, the non-inclusion of private sector stakeholders in consultation can lead to complications, as "we have witnessed in formulation and implementation of the Brownfield Refineries Policy over the last five years".

He said that while the prime minister and finance minister were repeatedly stressing the inclusion of private sector in consultation, government officials apparently thought otherwise or maybe they felt more comfortable working with public sector companies only.

"On behalf of Oil Companies Advisory Council, I would like to assure them of our fullest cooperation in the best national interest," he added.