October 14, 2008	Tuesday	Shawwal 14, 1429

ISLAMABAD, Oct 13: The government has decided to keep reserves of petroleum products for 10 days instead of 21 to reduce the outflow of dollars, sources told Dawn on Monday.

The decision will bolster the country’s foreign exchange reserves.

The sources said although it was mandatory to maintain oil reserves for 21 days, the decision had been taken to help the government save dollars and channel them into foreign exchange reserves.

The Oil Companies Advisory Committee will meet in Karachi on Tuesday to review the situation on reserves.

The government, in its bid to discourage the outflow of dollars, has already rejected a proposal of marketing companies to allow them to import oil on their own.

After the decline in the crude oil price over the past two weeks, the government is no more paying a fortnightly subsidy of Rs1.4 billion on diesel. The subsidy works out to Rs6.5 per litre.

The government is earning Rs22 per litre petroleum development levy instead of Rs19.52.

Before the decline in crude prices, the government was paying a subsidy of Rs8.21 per litre on kerosene, Rs7.41 on light diesel oil and Rs6.42 per litre on high speed diesel.

According to the ministry of petroleum, the government has to pay over Rs40 billion to oil marketing companies and refineries on account of price differential claims (subsidy). The outstanding amount could only be paid through earnings in the wake of decline in crude oil prices in the international market.

An official told Dawn that as per the existing crude oil prices in the Gulf market the government was earning Rs9.53 per litre on diesel.

So even after pulling back the subsidy cushion, it was still earning Rs3 per litre.

The ministry has suggested to the ECC to empower Ogra to start monitoring the prices of furnace oil. Ogra has shown interest in regulating the prices of furnace oil, but so far it is dependent on the flow in open market.