March 10, 2002	Sunday	Zilhaj 25, 1422

KARACHI, March 9: The government is expected to announce an “oil vision” this month, which will specifically deal in sectors like deregulation, privatization and margins of oil marketing companies (OMCs).

This was stated by Petroleum Secretary Abdullah Yousuf in an informal chat with Dawn at launching ceremony of Pakistan Stock Market Fund (PSM) and Pakistan Income Fund (PIF) on Friday night.

“We have to give the vision before the privatization of the Pakistan State Oil (PSO),” he said.

On the issue of OMCs margin, he did not give details as to what would be the actual upward revision from the current two per cent.

The decision of raising the margins of OMCs to four per cent has been lingering for the last six months. OMCs have been mounting pressures on the government to honour its five-year-old commitment by raising the margin, but the government has kept it frozen since 1995.

One of the leading OMCs’ executive feels that if the government wants to see healthy buyers for PSO followed by future investment in the oil sector, it has to fulfil its commitment now.

To a query that the sell-off of PSO to a single entity will create a monopoly in the market, Abdullah Yousuf dispelled the impression, saying “there will be no monopoly and instead there will definitely be a dominant player.” The government, he said, would sell the oil giant after due consideration.

The government and the financial adviser of the PSO’s transaction — JP Morgan — are reported to have decided that the oil giant will be sold to a single entity. PSO will be privatized by August this year and the government will invite expression of interest (EoI) in the current month.

To another query that the prices of POL products are expected to be fixed on “daily basis” after complete deregulation of oil products in July 2002, Abdullah Yousuf said that there was a little possibility that prices would be fixed on daily basis.

“I think it will be impractical. The fortnightly fixation of prices will continue,” he added.

However, chief executives of the OMCs like PSO and Shell Pakistan have other views to offer.

“I have already informed the government that we are ready now to fix prices of petroleum products on daily basis provided that the government takes a final decision in this regard,” Managing Director, Pakistan State Oil, Tariq Kirmani said.

Market sources said that in case a firm decision was taken on fixation of petroleum prices on daily basis, the role of Oil Companies Advisory Committee (OCAC) would end. At present an average global oil prices is taken to fix the POL prices on fortnightly basis.

After complete deregulation, the government is expected to ask the OMCs to import the commodity on their own. The scenario will be changed. Petroleum prices will vary from pump to pump of various OMCs. Only those oil companies will be able to grab more market share that will import cheap crude oil from various destinations.

“The market will see intense competition and the companies will run on their efficiency,” Tariq Kirmani said.

Chairman and Chief Executive, Shell Pakistan Limited (SPL), Farooq Rahmatullah, also sees no problem if prices are fixed on daily basis provided some issues are discussed and addressed before any decision is taken.

He told Dawn that till now no decision had been taken yet on daily price issue and it was still not clear at the moment whether the government would allow OMCs to import products on their own.

“These issues are still to be discussed and resolved,” he added.

He said the issue of primary freight pool would have to be discussed as the secondary freight pool system had already been deregulated. “The government is expected to hand over the issue of primary freight pool to the OMCs,” he added.

In future, the government is also considering to curtail the number of depots to minimum eight or to maximum 15 from the current 29 designated depots all over the country. The issue is currently under discussion, he added.

He said the government had to look into different models of various countries as to how prices of POL products were fixed on daily basis there.

Chairman, Pakistan Petroleum Dealers Association (PPDA), Abdul Sami Khan, said the price fixation on daily basis seems impractical as there is a lot of fluctuation of oil prices in the world market. “I think fortnightly price fixation is enough right now for the consumers,” he added.

Before moving on to daily basis, the government should curtail heavy taxation on POL products so that prices could be brought to affordable levels. There will be a marginal difference if prices are fixed on daily basis.