ISLAMABAD: The Ministry of Energy has directed the Oil and Gas Regulatory Authority (Ogra) to finalize the framework for transferring the responsibility of setting petroleum prices to the oil industry.
In a letter issued on Wednesday, the ministry instructed Ogra Chairman to convene a meeting today (Thursday) to discuss the analysis, implications, and strategies for deregulating petroleum products. This move follows Prime Minister Shehbaz Sharif’s directive to delegate pricing responsibilities to oil marketing companies (OMCs). However, the two main stakeholders—OMCs and dealers—have not been invited to the meeting.
Currently, four of the eight petroleum fuels consumed in the country—jet fuels for the air force and airliners, hi-octane, and furnace oil—are deregulated. The regulated products include petrol, high-speed diesel, light diesel oil (LDO), and kerosene.
The Oil Companies Advisory Committee (OCAC) has long advocated for the phased deregulation of the petroleum fuel sector, beginning with LDO and kerosene. In August 2022, the government announced that the oil industry would be given the freedom to set petroleum product prices, with the deregulation mechanism initially set to be implemented from November 1 of that year.
While OMCs support deregulating the remaining fuels, dealers, including petrol pump owners, oppose the move, arguing that deregulation would place their commissions under OMC control. Presently, OMCs earn a margin of Rs7.87 per litre for both petrol and diesel, while dealers earn around Rs8.70 per litre.
Amid pressure from both OMCs and dealers to increase their margins following the recent federal budget, the energy ministry has not included representatives from either stakeholder group in today’s meeting, which will be chaired by Energy Minister Musadik Malik.
Abid Ibrahim, an industry expert and former senior executive of an international OMC, commented that the government has shown confusion over the subject in recent times. “Deregulation means there is no set formula or percentage for setting margins for both OMCs and dealers. The IFEM or freight margins must be independent for each company, and each company should be free to pass on its import price,” Mr. Ibrahim explained.
He added that deregulation could result in varying petrol and diesel prices across different parts of the country and between stations of different companies. “But the positive side is that many companies would invest in quality and service, attracting customers willing to pay more for better fuel,” he noted.
Meanwhile, some OMC officials suggested that the sudden move by the petroleum division to call the meeting on deregulation was an attempt to counter the companies’ demands to raise their margins.
Story by Kalbe Ali
