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ECC caps OMCs’ margin, dealers’ commission

* Duty for oil refineries, import duty on crude oil cut to 7.5% each
* ECC imposes ban on export of diesel to Afghanistan

By Sajid Chaudhry

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Wednesday approved the new oil pricing mechanism, reducing deemed duty for oil refineries and import duty on crude oil import to 7.5 percent each and fixing margins of OMCs and dealers.

These measures would have an impact of Rs 5 and Rs 3.15 on per litre petrol and diesel prices, respectively, but the consumer prices of these two products would not be cut and the money saved would be used in bringing the subsidy on diesel down.

Addressing a press conference here after the meeting of ECC, Federal Finance Minster Naveed Qamar said the measures taken would not benefit consumers. These measures would help the government reduce the subsidy on diesel by Rs 8.15 per litre.

The minister said the government could not pass on the benefits of the reduction in OMCs’ and dealers’ margins to consumers. He said the government was still giving Rs 35 per litre subsidy on diesel that amounted to Rs 1 billion a day.

The minister also said the ECC had fixed the margins of Oil Marketing Companies (OMCs) and dealers’ commission according to crude oil price of $100 per barrel.

The ECC has also decided to reduce the deemed duty (a subsidy) for oil refineries from 10% to 7.5%. Import duty on crude oil has also been reduced from 10% to 7.5%. He said the ECC had also directed the Petroleum Ministry to work out further cut in the deemed duty to reduce oil prices in the country. The minister said that the numbers of oil-marketing companies’ depots for freight equalization had been reduced to only 13 from 29.

He said the government had also taken the power of freight calculation from OMCs and had authorized the Oil and Gas Regulatory Authority (OGRA) to calculate the freight margin. He said the government had received complaint of adulteration of kerosene oil with diesel and it would try to reduce the price gap between these two products to resolve the matter.

He said the government would eliminate the subsidy on diesel gradually. He said that government had paid Rs 165 billion to OMCs as price differential claims due to rising oil pricing in the international market.

An official said that after capping OMCs’ margin according to crude oil price of $100 per barrel, the margin on high speed diesel would come down to Rs 1.13 per litre from the current level of Rs 1.55 per litre and margin on petrol would drop to about Rs 1.60 per litre from Rs 2.12.

The ECC also decided to impose ban on the export of diesel to Afghanistan for North Atlantic Treaty Organisation (NATO) due to the expected shortage of diesel in the country. The export of subsidized diesel to Afghanistan was hitting the national exchequer worth Rs 1 billion per month.

The ECC also formally approved the ban on export of sugar to secure sugar stocks in the country till the next crushing season starts.

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