Oil Companies Advisory Council shows reservations about diesel price cut

The Oil Companies Advisory Council has said the country will face a shortage of diesel, 24NewsHD TV channel reported on Monday.

The councils wrote a letter to the Oil and Gas Regulatory Authority chairman raising its reservations about the government's decision.

It read:  “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 GoP vide ECC's decision no ECC-307/34/2020 dated 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 letter added: “As per GoP approved mechanism, in case of no import by 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.

“Since PSO did not import any HSD during the first fortnight of July 2023, the previous Premium i.e. USD 11.50 per BBL should have been used in price computation for the second fortnight, however, OGRA used a Premium of USD 4.20 per BBL; this arbitrary revision of Premium is against the essence of above mentioned ECC decision.

“It is also pertinent to mention that apart from 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. The impact of this anomaly is computed as under:

“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 Rs11 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.“