KARACHI: The Oil and Gas Regulatory Authority (OGRA) dismissed the complaints of the oil industry over the recent reduction in diesel prices, saying the move was in line with the government’s policy guidelines.
The prices of petrol and diesel have been worked out in accordance with the formula approved by the Economic Coordination Committee of the Cabinet on July 28th, 2020, according to ORGA.
“Accordingly, reduction of Rs9/litre in petrol and Rs7/litre in diesel prices have been passed on to general public on July 16, 2023,” it said in a statement.
The authority stated that ECC decision provides that in case of non-availability of PSO’s premium, freight or incidentals of previous fortnight, the PSO’s previous month available incidentals of a fortnight will be applicable.
According to details, PSO’s previous month available incidentals were incorporated in the price computation, however, diesel premium applicable for the period July 1-December 31, 2023 at $4.20/bbl of PSO was available since May 29, 2023 as mutually agreed between PSO and Kuwait Petroleum Company, the same was included in the said prices. “Therefore, the ECC decision has been applied in letter and spirit and the assertions of oil industry on pricing mechanism as well as supply disruptions are baseless and unacceptable,” OGRA maintained.
The oil industry has termed the reduction in price of high speed diesel (HSD) as manipulated. After Oil Companies Advisory Council, another oil sector representative body, Oil Marketing Association of Pakistan (OMAP) raised questions on the cut in HSD price.
OMAP in a letter to Dr. Musadik Malil, State Minister Petroleum, expressed deep concerns regarding the recent decision made by the government and enforced by OGRA, which has significantly impacted the oil marketing companies in “an unfavorable manner”.
“This decision, pertaining to the reduction of the price of HSD for the second fortnight of July 2023, goes against the established formula approved by the GoP via ECC’s decision no ECC-307/34/2020 dated July 28, 2020,” OMAP claimed.
“Rather than following the approved formula and absorbing the impact of the price increase by reducing the petroleum levy, the price of HSD was unilaterally and unrealistically was reduced,” it added.
The action by OGRA deviates from the government’s approved mechanism, and also contradicts the essence of the aforementioned ECC decision, according to OMAP. “Furthermore, it is important to note that the other incidentals included in the price were carried over from the second fortnight of June 2023.”
The decision has reportedly led to an inventory loss of Rs11 billion for the industry, which, if true, is unsustainable and poses a grave threat to the already fragile state of the oil Industry.
“The industry is already facing severe financial constraints due to insufficient margins, increased markup, high global prices, depreciation of the rupee, and other challenges. If this manipulation in pricing is not rectified through an immediate price revision, OMCs will be unable to ensure uninterrupted fuel supplies, which will further exacerbate the crisis,” the oil body warned.
