Share this story!            

Talks on new oil pricing formula remain inconclusive

By Zafar Bhutta

ISLAMABAD: The dialogue between government, Oil Marketing Companies (OMCs) and oil refineries regarding the new oil pricing formula remained inconclusive Thursday and government has called another meeting on July 14 for further consultation, Daily Times learnt.

Sources said that senator Rukhsana Zubari headed the meeting and additional secretary petroleum, Shaukat Durani attended the meeting from government side. Zubari asked the OMCs to cap the margin in the national interest to facilitate the consumers.

Sources said that the meeting proposed to study the Indian model of oil pricing mechanism that would be presented in the next meeting for further discussion. Zubari was of the view that the Indian model could be successful in the country regarding the margin of OMCs. However, OMCs representatives opined that the Indian oil pricing mechanism was giving more margins as compared to Pakistan.

OMCs representatives said that cost of doing business in the country was increasing and freezing of margin would further aggravate the situation. The meeting was informed that the margin on petrol stood at Rs 2.12 per litre, Rs 2.40 per litre on HOBC, Rs 1.62 per litre on diesel. They said that the delayed payment of price differential claims by government had caused distortion in their margins.

Sources said that OMCs also proposed the government to review the oil pricing formula after every six months to adjust the margins and taxes on petroleum products in the current scenario of oil price hike in international market.

They also said that if the government was to freeze the margin on petroleum products, it should be linked with inflation.

Oil refineries representatives said that the removal of 10 percent deemed duty would disturb their expansion plans in the country. They also demanded alternative incentive package either by increasing their margin or reducing the duties on the import of crude oil. They said that removal of the deemed duty would lead to loss to the refineries.

Oil refineries despite the non-payment by OMCs continued the smooth supply of oil in the country. They also warned the meeting that if their operations were disturbed after the removal of deemed duty on the high-speed diesel, the country would be depending on the imports and it will be impossible to sustain imports on deferred payment.

Sources said that oil refineries are ready to withdraw the 10 percent deemed duty on high speed diesel but they have at the same time demanded an incentive of Rs 12 billion either by increase in profit margin or relaxation in taxes. Oil refineries warned that if the deemed duty is withdrawn and they were not offered any other alternative incentive, their business in Pakistan would be shut down.

Oil refineries, from July 1, 2002 were allowed to charge a deemed duty on some of their products enabling them to run their operations on a self-financing basis if their return on assets remained below 40 percent. During that time, it was also decided that the decision of allowing deemed duty would be reviewed after one year but no movement had been made so far due to strong oil lobby, sources added.

After abolishing the deemed duty of 10 percent, the prices of diesel would be reduced by Rs 5.68 per litre. At present the price of high-speed diesel stands at Rs 49.05 per litre.

Home | Business

Share this story!