No respite: Hike in oil prices of up to Rs9 per litre on the cards

OGRA proposes to keep oil prices unchanged, provinces again given option of taking on the burden of subsidy.

ISLAMABAD:

Oil prices for the month of April are likely to go up to Rs8.94 per litre in line with a hike in global oil prices as provinces appear unwilling to bear the cost of subsidy on petroleum products except High Speed Diesel (HSD).

The Oil and Gas Regulatory Authority (Ogra) in a summary moved to the federal government on Thursday proposed that oil prices be kept unchanged by adjusting the hike in Petroleum Levy. “Keeping in view the current ongoing surge in international petroleum products prices, fixation and notification of oil prices should be carried on a quarterly basis and the existing monthly pricing framework be abolished to provide relief to the public at large,” a senior official of Petroleum Ministry said quoting summary of Ogra.

Ogra also said that the practice of regular import of petrol should be changed to long term contracts. “The federal government should form a plan to import it on a long term contract basis,” Ogra said adding that the authority had also observed unacceptably high level ocean losses up to 0.6% in case of certain cargos of motor spirit (MS) and HSD. Ogra, as an interim measure restricted ocean losses to average of remaining acceptable cargoes.

“Ogra has sought advice from the federal government to adopt acceptable level of ocean losses to determine prices of petroleum products,” the Petroleum Ministry official said.

According to final summary moved by Oil and Gas Regulatory Authority (Ogra) to the petroleum ministry, petrol price will go up by Rs8.02 per litre (8.2%), High Speed Diesel (HSD) Rs4.7 per litre (4.5%), kerosene oil Rs5.29 (5.5%), High Octane Blending Component (HOBC) Rs8.94 (7%), Light Diesel Oil (LDO) Rs5.45 per litre (5.8%), JP-1 Rs2.89 (3.3%) and JP-8 by Rs3.73 (4.3%) due to increase in global oil prices.

“If the proposed prices are increased, the price of petrol will go up to Rs105.68 per litre, kerosene oil to Rs101.96 per litre and the price of HOBC to Rs135.81,” the government official said. The increase in oil prices has been due to rise in average price of crude oil from $ 117 per barrel in February to $ 125 per barrel in ongoing month of March.

The government had decided in the beginning of the current month to keep prices of HSD unchanged till June 2012.However, it was decided that the federal government would take up issue of providing subsidy on other petroleum products with provinces if they wanted to keep oil prices unchanged.

“Ogra has proposed to the federal government to keep prices of kerosene oil, LDO and motor spirit (MS) unchanged by adjusting petroleum levy,” a senior official of Ogra said adding that government would have to bear loss of Rs6.5 billion revenue in case petroleum levy is cut to keep oil prices unchanged.

He said that Ogra had observed that recovery of price differential claims (PDCs) of Pak Arab Refinery Limited (Parco) was causing hike in oil prices which should be withdrawn. “The consumers will be paying Rs 0.78 per liter on HSD and Rs 0.38 per liter on petrol to recover Rs8 billion PDC of Parco in four years in line with the decision of the Economic Coordination Committee (ECC),” the official said.

Petroleum Ministry official said that federal government has taken up the proposal with provinces to bear subsidy on petroleum products except HSD from their own resources if they wanted to provide relief to the consumers by keeping oil prices unchanged but no response had been received yet. “Now the summary relating to oil price hike is ready and federal government will again contact provincial chief secretaries to take their consent on provision of subsidy from their own resources,” official said.

Published in The Express Tribune, March 30^th, 2012.