The price of High-Speed Diesel (HSD) for the second fortnight of July 2023 has been reduced by Rs. 7 by the Government of Pakistan (GoP) despite the fact that the price was increasing based on a formula approved by the Economic Coordination Committee of the federal cabinet on July 28, 2020.
“Instead of passing on the increase or absorbing the impact of this increase by reducing Petroleum Levy, the price was unilaterally and unjustly reduced by applying inaccurate Premium,” the Oil Companies Advisory Council (OCAC) said in a letter to Chairman Oil and Gas Regulatory Authority.
As per GoP approved mechanism, in case of no import by Pakistan State Oil (PSO) during a particular fortnight, Premium and other incidentals for the previous fortnight have to be applied; GoP implemented this policy to ensure that the industry gets an accurate recovery for inventory which has been acquired on the rates prevailing in the previous fortnight, the letter explained.
OCAC is of the view that since PSO did not import any HSD during the first fortnight of July 2023, the previous Premium i.e. $11.50 per BBL should have been used in the price computation for the second fortnight. but OGRA used a Premium of $4.20 per BBL. This arbitrary revision of Premium is against the essence of above mentioned ECC decision.
OCAC said that apart from the Premium, other incidentals included in the price were from the previous period i.e. second fortnight of June 2023. “This clearly shows that the Premium applied is anomalous,” it said.
The impact of this anomaly is computed as under:
Description Unit Value
Applicable Premium – Import during 2 F June 2023 USD/BBL 11.5
Premium applied in Pricing USD/BBL 4.2
Shortfall in Premium USD/BBL 7.3
Exchange Rate used for Pricing PKR/USD 278.5
Shortfall in Premium in Pak Rupee PKR/BBL 2,033.05
Conversion Factor – BBL to L L/BBL 158.98
Impact on Price PLR/L 12.79
Based on stock levels at the end of the previous fortnight and expected local production, this manipulation in pricing has generated an inventory loss for the industry to the tune of ~Rs. 11 billion which is not sustainable and will severely impact the already crippled oil industry.
“You are well aware that the industry is facing [a] severe financial crunch due to insufficient margins, increased markup, high global prices, depreciation of [the] Rupee, etc., and will not be able to manage uninterrupted fuel supplies if this manipulation in pricing is not rectified through immediate price revision. Your urgent action is requested in order to avoid any supply chain challenges,” OCAC said.
Source: Pro Pakistani