January 18, 2007	Thursday	Zilhaj 27, 1427

KARACHI, Jan 17: The Rs four per litre cut in petrol price is unlikely to boost petrol sale. Analysts and petrol dealers anticipate that the sale of petrol may remain in the negative by the end of current fiscal year due to rising conversion of vehicles into CNG and LPG.

Petrol sales have declined by 5.10 per cent to 576,000 tons as compared to 607,000 tons in the same period of last fiscal.

“I do not think that the petrol sales will get a sudden flip. It will remain the same as it was before the price cut,” said chairman, Pakistan Petroleum Dealers Association (PPDA), Abdul Sami Khan.

Soon after the cut in prices, there has been no notable increase in rush of petrol version vehicles at the petrol pumps. Sales have been same as it was before Jan 15, Sami Khan said, adding that petrol sales are now more dependent on motorcycles since its population has increased manifold in the last few years.

Giving another reason of dwindling petrol sales, he said genuine petrol pumps are facing problems due to proliferation of illegal sale of petroleum products, including smuggled Iranian oil products through unauthorised oil depots (Dabba Stations).

He said he had informed Petroleum Minister Amanullah Jadoon, in a letter that these illegal stations are also hazard for environment as loose petrol products are stored without any safety measures and any dangerous incident could happen any time. The government is losing millions of rupees in terms of income tax, sales tax and other levies.

Sami Khan said that newly-licensed oil marketing companies are playing a major role in this thriving illegal activity by providing oil products.

Research Head of Jehangir Siddiqui Capital Markets (JSCM) Mohammad Sohail said that petrol sales will remain in the negative despite cut in prices as the number of vehicles fitted with CNG has been gaining momentum.

According to JSCM research, local oil prices have increased by two to nine per cent during 2006, while Arab Light Oil prices ended with an increase of four per cent in 2006.

Historically Arab Light Oil had traded at a discount of $5-6 per barrel to international crude oil price. The average price of Arab Light Oil remained at $55.6 per barel in 2006 as compared to $53.7 in 2005. Petrol price has surged to Rs57.70 per litre in 2006 as compared to Rs56.29 per litre in 2005.Despite linking local oil prices to global oil prices, no downward revision in domestic oil prices was made by the government in 2006.

Prices of regulated products were kept frozen in most part of 2006 (since May 2006) although international oil prices had fallen by 12 per cent from May to December 2006, the report said.

The government has recovered the PDL (petroleum development levy) losses by freezing the prices that it incurred earlier by not fully passing on the global oil price increase to the consumers.

The government had collected Rs12-13 billion as PDL during July-December 2006. The report said that the government is likely to stabilise prices of regulated products at current levels for at least six months.

The government’s revenue from oil products in the form of GST would decline marginally after cutting the petroleum products’ prices.

With oil products having only 2.2 per cent weightage in Consumer Price Index (CPI) basket, its direct impact on inflation is nominal. CPI was recorded at 8.39 per cent in July-December 2006-2007. This is expected to slightly cool down below 7.75 per cent in second half of current fiscal. Inflation may remain between 7.5-8.0 per cent in 2006-2007, the report added.

Petrol sales now heavily rely on Japanese and Chinese bikes. Over 800,000 bikes were sold in 2005-2006 which used to be just 100,000 units three years back. However, bike sales during the last four months have been showing decline which may give some jerk to petrol sales.