Oops!: Govt reverts decision; oil prices go down

Finance minister was waiting for a written order: Sources.

ISLAMABAD:

After much hue and cry and confusion, the Ministry of Finance finally approved a summary late Sunday night seeking withdrawal of the increase in oil prices. 

In this regard, the Ministry of Petroleum issued a notification to implement what Prime Minister Raja Pervaiz Ashraf had ordered a few days ago — roll back to the original lower prices. After the notification, the prices of petroleum products stand at what they were earlier on before the hike.

The orders of the premier were implemented after a cut in the petroleum levy was accepted by the finance ministry.

After the notification, the prices of petrol stand at Rs103.07, High Speed Diesel at Rs109.21, Light Diesel Oil at Rs94.33, and Kerosene Oil at Rs99.90 per litre.

On Thursday, the government had announced it would increase oil prices by up to Rs4.35 per litre due to which petrol stood at Rs106.60 per litre, High-Speed Diesel (HSD) at Rs113.56 and Light Diesel Oil (LDO) at Rs98.26 per litre. Following the withdrawal, petrol prices went back to Rs103.07 per litre, HSD to Rs109.21 and LDO to Rs94.33.

The prime minister had withdrawn the decision of the prices hike but apparently a lack of understanding on how the system works on the part of the newly-appointed finance minister caused the delay in implementation of the orders, The Express Tribune has learnt.

Taking no chances, Finance Minister Saleem H Mandviwala was waiting for a “written” order from the government seeking the withdrawal of increase in oil prices, sources revealed.

Prime Minister Ashraf on Saturday had ordered the withdrawal with immediate effect and had issued these instructions during a meeting with the finance minister at the Prime Minister House.

Officials of the petroleum ministry revealed that they had completed their homework, moved a summary to the finance ministry on Saturday soon after the directions of the premier, and been waiting since then for the approval of the finance ministry.

Incompetency or not on the finance minister’s part, the beneficiary of this delay remains the finance ministry, officials said.

While explaining the finance ministry’s role, an official of the petroleum ministry said that it was the finance minister who calls the shots as the price of POL products include the Petroleum Levy and that remains a prerogative of the finance ministry.

The government can withdraw price increases by cutting the rate of petroleum levy; however, this is not acceptable to the finance minister, sources said. The finance ministry is expected to lose Rs4 billion in the current month’s revenues to absorb the impact of the oil pricing.

Currently, the petroleum levy on petrol and diesel, the two main petroleum products consumed in the country, stands at Rs10 and Rs8 per litre, respectively. Oil companies estimate the average consumption of petrol in the month of March would be around 248,000 tonnes while that of diesel would be as high as 620,000 tonnes.

The rollback order has also led to a tug-of-war between the ministries of petroleum and finance, as to who would absorb the hit from this price reduction.

Oil marketing companies (OMCs) have demanded that reduction should be absorbed by slashing the petroleum levy. They fear that repaying the amount would be difficult keeping in mind that the current government would end its term in a few days.

The finance ministry, however, maintained the OMCs could bear the Rs4 billion differentials for now, adding that it would be adjusted gradually in future.

Published in The Express Tribune, March 4^th, 2013.Published in The Express Tribune, March 4^th, 2013.