ISLAMABAD, Jan 19: The Public Accounts Committee (PAC) of the National Assembly on Friday observed that there were "loopholes" in the petroleum ministry’s formula for fixing prices of petroleum products, as it safeguarded the interests of refineries and oil marketing companies at the cost of common consumers.

The committee ridiculed the recent cut in petroleum and diesel prices by the government, which it said was peanuts compared to the sharp decline in prices in the international market a few months ago.

Petroleum Secretary Ahmed Waqar will brief the committee next month on the price-fixing formula and higher profits reaped by the oil marketing companies and refineries in the process.

The secretary told the committee that the ministry had followed the 1994 price-fixing formula as approved by the cabinet and that it could be sent back to the cabinet for amendments.

"The oil companies are looting domestic consumers with both hands (due to this formula)," said Ali Akbar Vaince, a member of the committee and MNA of the ruling Pakistan Muslim League.

The committee observed that the government had slashed the prices of petrol by Rs4 (6.93 per cent) per litre and diesel by Rs1.03 (2.66 per cent) in a decision which was taken very late and after much criticism. It was in sharp contrast to a 35 per cent decline in the international crude prices despite the government’s claim that domestic prices were linked with the international market.

Some members said that it was a matter of great shock that the government was exporting petrol at Rs26-27 per litre to neighbouring countries, including Afghanistan, while its own people were paying around Rs53.70 per litre.

PML-N MNA Chaudhry Nisar Ali Khan said that every year the government spent billions of rupees of taxpayers’ money while subsidising losses of the oil companies and refineries. He said the refineries showed their return on the paid-up capital less than 10 per cent and lodged refund claims on account of profit shortfall. Such practices needed to be discouraged.

The committee was informed that the government had refunded Rs11.370 billion to the refineries sanctioned by the petroleum ministry on account of profit shortfall in 1993. The national exchequer suffered a great loss owing to excess claim of the refineries on account of profit shortfall by not including “other income” in the net return on paid-up capital amounting to Rs154.56 million. This was an accounting technique through which the refineries were stripping the government of billions of rupees annually, the committee was informed.

MNA Ghulam Rasool Sahi presided over the meeting in the absence of Malik Allah Yar Khan.

Chaudhry Nisar said the government was charging heavy taxes on all products, besides giving unlimited freedom to the oil marketing companies and refineries to make high profits.