The Ministry of Petroleum and Natural Resources has again asked the Economic Coordination Committee (ECC) of the cabinet, which will meet on August 7, to allow the ministry to put in place a mechanism that will lead to determination of oil prices every week.
At present, oil prices are announced every fortnight but the petroleum ministry wants to shift to the weekly price revision and then daily changes in a bid to better reflect price fluctuations in the international market, say sources.
According to the sources, the ministry has given the proposal on the insistence of oil refineries, which seek price revisions after small periods in order to avoid the burden of high prices for two weeks.
Earlier, the ECC had deferred decision on a summary of the petroleum ministry proposing oil price revision on a weekly basis following warning from the Oil and Gas Regulatory Authority (Ogra) that it would encourage dealers to create artificial shortage of oil in order to extract as much money as possible from the consumers.
Ogra believes that the weekly price determination will fail as the government will not be able to check hoarding and artificial shortage of petroleum products.
In a recent meeting, the National Assembly Standing Committee on Petroleum and Natural Resources had criticised the petroleum ministry and Ogra for their failure to stop profiteers and hoarders from stocking petroleum products two or three days prior to the price revision.
The ECC will also consider the liquefied natural gas (LNG) import project, guarantees for Pakistan State Oil (PSO) to enable it to import furnace oil on four-month credit, exclusion of high octane blending component (HOBC) from the inland freight equalisation margin and capacity payments to independent power producers (IPPs).
In a summary sent to the ECC, the petroleum ministry said the task force, constituted for the LNG integrated import project, had held meetings but failed to reach a logical end. The law ministry was of the view that the petroleum ministry should take up the LNG project’s summary with the Council of Common Interests (CCI) as the oil ministry sought to include LNG price in natural gas prices, which would lead to price hike. However, the petroleum ministry sent the summary again to the ECC to seek approval for awarding the contract.
According to sources, Prime Minister Raja Pervez Ashraf had also formed a committee, headed by the law minister, to resolve issues impeding progress on the LNG import project. However, the committee has not held a single meeting.
The ECC will also discuss the guarantees required for PSO to enable it to import furnace oil on four-month credit from international suppliers compared to the current two-month credit arrangement.
However, government officials are of the view that it is another ad hoc measure to continue oil supply rather than controlling the circular debt, which is piling up due to the power sector’s inefficiencies.
The ECC will also take up the dispute between the Ministry of Water and Power and Ministry of Petroleum over the Rs736.8 million loss claimed by the IPPs because of gas curtailment. The power ministry is asking the ECC to put the burden on Sui Northern Gas Pipelines while the other proposal is to resolve the issue through joint expert mediation between the two sides.
Published in The Express Tribune, August 4th, 2012.