The government has convened a special meeting next week to resolve the lingering issue of an oil price review mechanism and discuss the new CNG policy guidelines proposed by the petroleum ministry.
The meeting of the Economic Coordination Committee (ECC) of the Cabinet has been convened on December 18, a day after the Supreme Court is scheduled to take up the CNG (compressed natural gas) issues.
Oil price review mechanism
The ECC will discuss whether oil prices should be reviewed monthly or fortnightly, sources told The Express Tribune. The body has already suspended the weekly price review mechanism.
“The petroleum ministry wanted to continue the oil prices review on a weekly basis; Petroleum Secretary Dr Waqar Masood walked out of the ECC meeting on November 20 when the weekly price review was suspended,” said a source.
ECC members believe the parliamentary resolution to fix oil prices on a monthly basis should be honoured, the source said. The bureaucracy and Finance Minister Dr Abdul Hafeez Shaikh, however, insist that prices should be reviewed on a fortnightly basis to pass on price hike to consumers in two installments.
Opponents of frequent reviews
According to official sources that oppose weekly or fortnightly reviews, oil refineries and marketing companies pocketed billion of rupees due to these review mechanisms in the past few months.
The price of petrol would have been Rs100.18 per litre if determined on a monthly-basis in September 2012, instead of an average of Rs104.55 per litre under weekly and fortnightly mechanisms, the source said.
In the same month, diesel would have been sold at Rs109.09 per litre under a monthly price review mechanism against an average of Rs112.13 per litre based on weekly and fortnightly pricing mechanisms, the source added.
New CNG policy
In its new CNG policy guidelines, the petroleum ministry has proposed restricting the use of CNG to public transport and linking its price to 80% parity of petrol.
The Supreme Court has already suspended linking of the price of CNG with petrol.
The ministry has also proposed giving CNG dealers a margin equivalent to the one given to oil marketing companies (OMCs) and dealers on sale of petrol and diesel.
At present, CNG dealers receive a margin of Rs6.22 per kilogramme of CNG. OMCs and dealers, meanwhile, receive a margin of Rs1.98 and Rs2.37 per litre of petrol and Rs1.76 and Rs2.20 per litre of diesel respectively.
The ministry’s proposed CNG pricing formula includes cost of gas as base price, plus cost for compression, a dealers’ margin, gas infrastructure development cess (GIDC) and general sales tax.
Appropriate adjustment will be made in the GIDC to ensure 80% parity with petrol, the policy recommends.
The current ban on import of CNG kits and cylinders, and setting up new CNG stations will continue. Meanwhile, all CNG stations will be incentivised to convert to LPG (liquefied petroleum gas) under the new policy.
Published in The Express Tribune, December 16th, 2012.
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