Govt agrees to Deregulate Prices of Petroleum Products

The government has agreed to give the oil industry a free hand in setting oil prices by enacting deregulation as part of a new proposed energy policy beginning on November 1, 2022.

Currently, furnace oil prices are deregulated, although the prices of gasoline and high-speed diesel (HSD) are regulated.

In a meeting conducted on Wednesday, the executives of oil refineries, the state minister for petroleum, the chairman of the energy task force, Shahid Khaqan Abbasi, along with petroleum and ogra officials, achieved an agreement.

According to sources cited by the Express Tribune, all parties agreed that the prices of locally manufactured products from oil refineries and imported products from Pakistan State Oil (PSO) will be competitive in the local market.

Currently, Pakistan State Oil (PSO) imports fifty percent of its petroleum products, while oil refineries generate fifty percent of the country’s petroleum products to meet demand.

According to sources, Pakistan State Oil (PSO) and local oil refineries will actually compete on the local market.

Recently, the government agreed to increase Oil Marketing Company (OMC) profit margins until November 1, 2022.

Following the adoption of the new oil refinery policy, the government would remove the margins set for oil marketing businesses including Pakistan State Oil (PSO)

Govt ready to hike PSO margins to Rs 6 per litre

The government recently increased dealer margins to Rs 7 per litre, a trend that will continue after the new oil refinery strategy is implemented.

The margins of Oil marketing companies (OMCs) and oil refineries would be determined by market forces under the new oil refinery strategy, according to officials.

In a newly suggested policy, the government had already lowered the regulatory levy on crude oil imports from 5 to 2.5%, which was then increased to 5%.

According to the agreement, the government also promised to lower this tax to zero in the new oil refinery strategy.

“If the government does not remove the tax, the new refinery strategy would lose its relevance in the refining sector, according to a senior government official.

Officials added that the government has already raised the considered duty on gasoline and diesel to 10%.

However, the full sum went to the national treasury.

On the criteria for allowing oil refineries to construct upgradation plants with incremental revenue, the refineries and the previous PTI administration were at odds.

The previous administration agreed to allow refineries to invest 30 percent of the incremental money resulting from the collection of deemed duty in upgrading units.

However, some senior ministers from Karachi had a dispute with a local refinery, and as a result, they created obstacles for this method to be approved.

Now, the government will permit 30% of the incremental money to be invested in plant upgrades.

To upgrade their facilities, local refineries require an expenditure of $4 to $5 billion. Byco refinery has already initiated the installation of upgrading plants.

Officials from the oil business denied the existence of a monopoly in the oil industry in response to an inquiry regarding the possibility of a monopoly in the oil industry.

According to them, PSO secured 50 percent of the market, while local refineries held the remaining 50 percent of the oil market share.

The Pakistan State Oil (PSO) was a state-owned enterprise, hence the government had exclusive authority over this organisation.

According to them, the new refinery would also benefit the PSO, which was in a financial bind due to its failure to make foreign payments.

Recently, the government allocated 30 billion rupees to rescue PSO from a cash-starved position in which receivables had surpassed 600 billion rupees.

The new oil refinery strategy will also provide PSO the ability to set its own margins and compete with other refineries.

Officials from the oil sector stated that competition will also lead to competitive oil costs for consumers.