Carte blanche: Oil industry bigwigs may receive a free hand

If plan approved, they will set margins of petroleum products.

ISLAMABAD:

As prices of petroleum products are continuously coming down, the government plans to put consumers at the mercy of oil industry barons by giving them a free hand to fix their margins.

If the plan is approved, the prices of petroleum products would vary across the country.

The plan is being proposed after the petrol crisis, the blame of which was placed on several officials of the Ministry of Petroleum and the Oil and Gas Regulatory Authority (Ogra) chairman.

The plan is being proposed by the same top guns of the finance ministry who had refused to release funds to Pakistan State Oil (PSO) for oil imports in order to boost foreign exchange reserves of the country. They had committed to the International Monetary Fund (IMF) to keep the reserves at $15 billion at the end of December 2014.

The oil industry had failed to maintain fuel stocks due to a persistent fall in oil prices in an attempt to avoid inventory losses, and deregulation of their margins would help them to boost the reserves.

Officials said that the finance ministry had prepared a plan, which will be presented to a meeting of the Economic Advisory Council (EAC), likely to meet on Saturday.

According to them, the petroleum ministry, which had been dealing with the issues of oil industry, had been bypassed and the finance ministry had prepared the plan after facing pressure from the industry. The government has raised General Sales Tax (GST) on the sale of petroleum products from 17% to 27%.

In October 2014, the government had already increased the margins of oil marketing companies (OMCs) and dealers. The margin of OMCs on high-speed diesel had been increased by 26% or Rs0.49 per litre and on motor spirit (petrol) it was increased 5% or Rs0.12 per litre.

Now, the petrol crisis has become a blessing in disguise for the OMCs and dealers, who may mint money from the consumers.

Earlier, the Ministry of Petroleum had proposed the Economic Coordination Committee (ECC) to allow deregulation of margins on petrol. It had asked Ogra to assess 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, 2014 took up for discussion a summary sent by the Ministry of Petroleum and Natural Resources, which sought to increase margins of OMCs and petroleum dealers as well as deregulate margins for six months on a trial basis.

The 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 for 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 dissatisfied at the fact that there was no system in place to implement the deregulation plan and check how the oil industry would determine the margins.

Published in The Express Tribune, February 20^th,  2015.

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