ISLAMABAD-While blaming the federal government for a ‘forced reduction’ of Rs7 per litre in the high speed diesel (HSD) price, the Oil Companies Advisory Council (OCAC) has demanded to reverse the decision and instead increase it by Rs12.79 per litre.
In a letter, regarding forced reduction in HSD price at the cost of the oil industry, to the chairman Oil and Gas Regulatory Authority, OCAC has claimed that it incurred a loss of Rs11 billion to the oil industry and warned of interruption in fuel supply if the decision of price reduction is not immediately rectified. “You are well aware that the industry is facing severe financial crunch due to insufficient margins, increased markup, high global prices, depreciation of rupee etc. and will not be able to manage uninterrupted fuel supplies if this manipulation in pricing is not rectified through immediate price revision,” the letter available with The Nation said.
Price of high speed diesel (HSD) for second fortnight of July 2023 has been reduced by Rs7 by the government of Pakistan (GoP) despite the fact that the price was increasing based on formula approved by GoP vide ECC’s decision no ECC-307/34/2020 dated July 28, 2020. Instead of passing on the increase or absorbing the impact of this increase by reducing petroleum levy, the price was unilaterally and unjustly reduced by applying inaccurate premium. As per GoP approved mechanism, in case of no import by PSO during a particular fortnight, premium and other incidentals for previous fortnight have to be applied; GoP implemented this policy to ensure that the industry gets accurate recovery for inventory which has been acquired on the rates prevailing in the previous fortnight. Since PSO did not import any HSD during first fortnight of July 2023, previous premium i.e. USD 11.50 per BBL should have been used in price computation for second fortnight, however, OGRA used premium of USD 4.20 per BBL; this arbitrary revision of premium is against the essence of above mentioned ECC decision. It is also pertinent to mention that apart from premium, other incidentals included in price were from previous period i.e. second fortnight June 2023; this clearly shows that the premium applied is anomalous.
Data computed by OCAC shows that applicable premium-import during 2nd fortnightly of June 2023 was $11.50/BBL and premium applied in pricing was $4.20/BBL. There was a shortfall of $7.30/BBL in premium. Similarly, exchange rate used for pricing was Rs 278.50 and the shortfall in premium in Pakistani rupee was Rs 2033.05/BBL. The impact of the premium was Rs 12.79/litre, the letter claimed. Based on stock levels at the end of previous fortnight and expected local production, this manipulation in pricing has generated an inventory loss for the industry to the tone of Rs 11 billion, which is not sustainable and will severely impact the already crippled oil industry. The OCAC has sought chairman OGRA’s in order to avoid any supply chain challenges.