Earlier, the petroleum ministry had proposed an increase of Rs0.16 per litre in high-speed diesel margins, but the OMCs did not agree. PHOTO: FILE
The Economic Coordination Committee (ECC) of the cabinet has tasked the Oil and Gas Regulatory Authority (Ogra) with assessing the impact of deregulating petrol margins following the committee’s refusal to give a free hand to bigwigs of the oil industry.
The economic decision-making body, in a meeting held on April 25, took up for discussion a summary sent by the Ministry of Petroleum and Natural Resources, which sought to increase margins of oil marketing companies (OMCs) and petroleum dealers as well as deregulation of margins for six months on a trial basis, sources say.
ECC members backed the proposed increase in margins but fiercely opposed deregulation, which would lead to varying prices across the country and provide an opportunity to the oil mafia to pocket billions of rupees from the consumers without any accountability.
They were surprised to know that there was no mechanism to tighten the noose around the oil mafia if they manipulated the deregulation of margins. They were also upset that there was no system in place to implement the deregulation plan and check how the oil industry would determine the margins.
“After the strong opposition, the ECC referred the matter to the regulator, asking it to examine the margin deregulation plan,” a source said.
Earlier, the petroleum ministry had proposed an increase of Rs0.16 per litre in high-speed diesel margins, but the OMCs did not agree. In a fresh summary, a slightly higher increase of Rs0.19 was proposed and for dealers an upward revision of Rs0.40 was recommended.
Meeting participants told the ECC that the revision in margins had been calculated on the basis of changes in the Consumer Price Index (CPI) since the last revision in November 2012 and considering an appropriate return on investment.
The revision will be made taking into account the rise of 16.4% in the CPI from November 2012 to February 2014, according to data of the Pakistan Bureau of Statistics, the state-run statistics organisation.
A study, conducted by the Pakistan Institute of Development Economics, has recommended an annual review of OMC and dealer margins based on markup on assets and the CPI figure of the State Bank of Pakistan.
The Ministry of Finance, however, suggested that margins should be left unchanged until prices of petroleum products started falling in a bid to avoid public criticism.
Ogra also opposed the demand of OMCs and dealers, suggesting that margins should be kept on hold in order to provide relief to the consumers. “The change in margins will also jack up oil prices, sparking fears of strong reaction from the public and opposition parties,” the source said.
Published in The Express Tribune, May 7th, 2014.
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