December 05, 2006	Tuesday	Ziqa'ad 13, 1427

ISLAMABAD, Dec 4: Oil marketing companies, retailers and transporters have been earning billions of rupees in profits for the last seven years thanks to petroleum products price revision mechanism.

Oil prices have fallen recently from their peak level of $75 per barrel to below $60, but the consumers are not offered any relief by the government on the pretext of generating additional Rs20 billion payable to the OMCs against their price differential claims - an oil subsidy.

Thus, leaving no option for the consumers but are forced to continue contributing towards boosting earnings of these companies.

Rising oil prices since November 1999, initially as a result of Opec supply-management policies, and later due to geopolitical uncertainties, had driven the international crude oil prices to an unprecedented level.

But in Pakistan this increase was further fanned by huge increase in the per litre margins of marketing companies, dealers and transportorters, besides the government share in the shape of petroleum development levy, customs duty, federal excise duty and 15 per cent general sales tax.

In the supply chain of oil from import to consumers, there are six stakeholders — the government importing the crude, domestic upstream companies producing crude, refineries, oil marketing companies, transporters and dealers. An increase in crude price can be absorbed at any or all of the levels but it was passed on to the end consumers.

Official statistics compiled by Individual-Land, an independent consultant group, showed that the oil marketing companies have been earning Rs1.63 per litre petrol as commission since March 5, 2005 as against Rs0.52 per litre in Nov 1999, an increase of 213.4 per cent. This raise has resulted into increasing the annual profit of the OMCs by Rs1.476 billion.

Whereas the retailers’ margin recorded a hefty growth of 442 per cent as it reached to Rs1.87 per litre petrol during the period under review as against Rs0.345 in Nov 1999. This increase in margins has raised the annual income of retailers by Rs2.3 billion.

The transportation freight increased to Rs2.15 per litre petrol on March 5, 2005, up by 339 per cent as against Rs0.49 in Nov 1999. The annual income of transporters rose to Rs3.266 billion. This means that due to this raise the average price of per litre petrol rose by Rs9.265 besides the incidence of taxes and international oil prices.

Similarly, the commission of oil companies rose to Rs1.57 per litre in case of diesel since March 2005 as against Rs0.204 in Nov 1999, an increase of 669.61 per cent. The annual profits of the OMCs rose by Rs12.828 billion due to this increase in commission.The retailers’ margin has been increased to Rs1.05 per litre of diesel during the period under review, up by 544.17 per cent as against Rs1.05 in Nov 1999. This increase resulted into enhancing the annual profit of retailers to Rs8.330 billion.

The freight element on transportation of diesel rose by 95 per cent to Rs1.27 per litre of diesel as against Rs0.65 during the period under review. This raise in freight charges earned an additional income of Rs5.822 billion for retailers.

This indicates that the average price of diesel up by Rs8.95 per litre due to this upward trend in shares of oil companies, retailers and freight element besides increase in taxation and oil prices in international market.