ECC approves fortnightly oil pricing mechanism

Aftab Ahmed

Islamabad: The Economic Coordination Committee (ECC) on Tuesday approved a fortnightly oil pricing mechanism based on Platts average.

The sub-body of ECC recommended fortnightly price revision to better plan for oil stocks, fair competition in the oil industry, margins aligned with international pricing trends, and smoothing out volatility of prices due to linking with PSO import price.

Sources told Newztodays.com that the mechanism proposed, based on Platts average and with fortnightly price revision, will not only lead to fair competition in the industry with all companies competing equally, but it will have several other benefits.

In its report, the ECC sub-body said that margins would be3 closely aligned with international pricing trends and smoothing out of volatility and distortions because of PSO’s purchasing dates. It will also help in planning for three months ahead with refineries and Oil Marketing Companies (OMCs), better inventory management, and better reporting of sales arid enforcement of the stock requirement.

https://newztodays.com/negotiations-held-ecc-body-seems-convinced-on-fortnightly-oil-prices-review-based-on-average-platts-rates/

The ECC body further said that it would also lead to complete transparency and visibility of oil prices and reduced dependence on one OMC (PSO). The committee said that the proposed formula is not new but being implemented in the case of MS and HSD and in case no import is made by PSO in any previous month. However, this is rarely observed.

The Petroleum Division has requested the economic coordination committee to adopt the proposed pricing mechanism to be applicable from August 1, 2020, or September) 2020 based on the previous fortnightly Platts average as per the parameters in line with recommendation.

Proposed Pricing methodology for Motor Gasoline/Motor Spirit (MS) and High-Speed Diesel (HSD)
The committee proposed that the Price be based on Arab Gulf Platt’s daily average for the number of days in the pricing period as the base commodity price.

It further proposed that Premium above Platts, freight, and incidentals be taken as an average of PSO’s procurement for the pricing period and added to the base commodity average price.

It said that taxation and Levies to be at applicable rates and exchange rate to be used as provisionally available, for PSO, but to be converted to actual upon the retirement of LC (not later than 60 days from B/L date) any adjustment to be made as prior period adjustment through a change in incidentals as soon as possible, as per present practice, es already approved by ECC vide its decision.

The price applicability period to be a fortnight, i.e., 1-15 and 16-end of the month. The new pricing mechanism is for Motor Gasoline and High-Speed Diesel (Euro-11-V spec. MS & HSD), besides other approved parameters, will remain unchanged. Other petroleum products pricing may continue as per current practice in vogue.