Petrol Pricing in Pakistan Likely to be Deregulated

Amid continuously aggravating petroleum shortage across the country, the government has decided to “completely deregulate” petrol pricing and marketing and do away with uniform pricing mechanism according to a report published in Dawn.

The decision comes at a time when oil marketing companies (OMCs) are under sheer criticism for their cartelization-like behavior in the case of high octane blending component (HOBC), another deregulated product whose price has not seen a reduction in line with a massive decline in international oil prices.

Related: Government Accuses OMCs for Artificial Shortage & Illegitimate Profiteering

Amid strong media criticism, the Oil and Gas Regulatory Authority (OGRA) warned some of the leading OMCs over the exorbitant retail price of HOBC and hinted at referring the matter to the Competition Commission of Pakistan (CCP) for anti-competitive and collusive practices.

As part of discussions with the OMCs, the petroleum division has also decided to link the price of petrol to Platt’s Oilgram of previous month instead of the current practice of pricing on the basis of actual import cost of the state-owned Pakistan State Oil (PSO). Likewise, petrol price will now be completely deregulated, including commissions of the OMCs and dealers on the pattern of HOBC.

Related: OGRA Takes Notice as Fuel Shortage Worsens

Reportedly the government has also agreed with the oil industry that inland freight equalization margin (IFEM) mechanism would also be deregulated that is currently used to keep the prices uniform throughout the country. This means the prices would significantly vary from one city to another and from one oil company to another. The consumer close to ports and refineries would be at an advantage to get products at cheaper rates while those away from ports and oil installations would have to pay a higher price. The difference could vary between Re 1 to Rs 5 per liter depending on the actual transportation cost.

Last week, OGRA wrote to the OMCs that it had observed that the price of HOBC being charged at various retail outlets was considerably higher than its cost. It said:

“Whilst this product is deregulated, however, in the interest of consumers it is expected that OMCs sell it at a reasonable price. There seems to be a form of consensus between various OMCs to sell HOBC at a much higher price.”

It asked the OMCs to reduce the price to a reasonable level based on their costs, lest the CCP takes due notice of such cartelization, and also keep OGRA informed about the steps for price reduction based on costs and healthy competition.

Related: PSO to Begin Importing Euro-5 Fuel

An official said that after deregulation of petrol price, OGRA at best would be able to issue such letters without any punitive action.

Full story: Dawn

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