LAHORE: The Oil Marketing Association of Pakistan (OMAP) has expressed serious reservations about a recent pricing decision made by the Government of Pakistan (GoP) and enforced by the Oil and Gas Regulatory Authority (OGRA).
OMAP claimed that the decision has resulted in a staggering inventory loss of rupees minus eleven billion for the industry, which OMAP considers unsustainable and a significant threat to the already fragile state of the oil industry.Â
In a letter addressed to State Minister for Petroleum Musadik Masood Malik, Chairman of OMAP, Tariq Wazir Ali, highlighted concerns that the decision to reduce the price of High-Speed Diesel (HSD) for the second fortnight of July 2023 deviated from the approved formula established by the GoP.
The formula, as per ECC’s decision no ECC-307/34/2020 dated July 28, 2020, was designed to absorb price increases by reducing the Petroleum Levy. However, OGRA’s decision unilaterally and unrealistically reduced the price of HSD, disregarding the approved mechanism and contradicting the essence of the ECC decision. Moreover, the incidentals included in the price were carried over from the second fortnight of June 2023.
Chairman OMAP further stated that the implementation of this unrealistic pricing decision has resulted in a substantial inventory loss of rupees minus eleven billion, adding to the financial challenges faced by the industry due to insufficient margins, increased markup, high global prices, and the depreciation of the Rupee. OMAP warns that failure to rectify this manipulation through an immediate price revision could lead to interrupted fuel supplies, exacerbating the crisis faced by the industry.
OMAP explained the importance of addressing these concerns promptly, as the stability of the oil industry is vital for the nation’s overall well-being and economic progress. The organization called for the government to revise the pricing through a just and transparent process to demonstrate its commitment to supporting industry sustainability and ensuring a level playing field for all stakeholders.
In response to OMAP’s criticisms, the OGRA spokesperson, Imran Ghaznavi, rebuts the industry’s resentment and questions raised regarding the fairness and correctness of the recent reduction in petrol and diesel prices, effective from July 16, 2023. Ghaznavi stated that the criticism is unsubstantiated and goes against the policy guidelines issued by the Federal Government.
According to OGRA, the prices of petrol and diesel were calculated strictly in accordance with the formula approved by the Economic Coordination Committee of the Cabinet on July 28, 2020. As per the ECC decision, a reduction of Rs. 9 per liter in petrol and Rs. 7 per liter in diesel prices was passed on to the general public on July 16, 2023. The decision also stipulated that if premium, freight, or incidentals from the previous fortnight were not available, the incidentals of the previous month would be applicable.
OGRA contends that the price computation incorporated the incidentals from the previous month, and the diesel premium agreed upon between Pakistan State Oil (PSO) and Kuwait Petroleum Company since May 29, 2023, was also included. Therefore, OGRA maintains that the ECC decision was applied in letter and spirit, and the claims made by the oil industry regarding the pricing mechanism and supply disruptions are baseless and unacceptable.
