ISLAMABAD: The Supreme Court on Tuesday asked the government to decide by Wednesday whether it would reduce on its own prices of petroleum and gas as suggested by a judicial commission or let the apex court intervene.

The judicial commission said in an interim report to the Supreme Court: ‘It is high time that the government should ponder seriously over reducing the burden of petroleum development levy (PDL) and uniform general sales tax (GST) at the rate of 16 per cent.’

Signed by Justice (retd) Bhagwandas, the five-page report observed that ‘freight rates, dollar-rupee parity source, cost of refining, margins allowed to distributors and dealers’ commission (too) need rationalisation and review in the larger public interest’.

Attorney-General Sardar Mohammad Latif Khan Khosa is required to v seek instructions and inform the three-judge bench, comprising Chief Justice Iftikhar Mohammad Chaudhry, Justice Raja Fayyaz Ahmed and Justice Chaudhry Ijaz Ahmed, about the government’s decision on price reduction by Wednesday. 

‘It is open to the Supreme Court to make appropriate directions for the relief in prices of petroleum products as well as natural gas, CNG (compressed natural gas) and LPG (liquefied petroleum gas) as deemed just, fair and proper.’

‘The government is earning profit worth billions of rupees by doing business with its own people,’ Justice Raja Fayyaz said when Advocate Mohammad Ikram Chaudhry read out the interim report before the court.

The chief justice was also unhappy over Oil and Gas Regulatory Authority (Ogra) insensitivity for not reducing petroleum prices by a single penny even though the court was seized with the matter for the past month.

On March 30, the Supreme Court had set up the commission under Justice (retd) Rana Bhagwandas to look into the oil pricing mechanism and also to probe the price trend of petroleum products since 2001 and submit a report in a month. 

The interim report suggested to the government to retrieve Rs15 billion from the ‘special reserves’ kept by refineries for future losses, upgradation of their capacity and improvement of the quality of their products, none of which was ever done, by suitably appropriating the same for social welfare schemes and development projects. 

‘It is common knowledge that refineries in Pakistan have been charging the price of higher quality from 2001 but producing inferior quality diesel with one per cent sulphur content — a banned item throughout the world,’ it said.

Local refineries can only produce HSD containing 1 per cent sulphur (inferior quality) while imported diesel contains 0.5 per cent sulphur (superior quality). 

Prior to 2002, all refineries were guaranteed a minimum of 10 per cent and maximum of 40 per cent return on their paid-up capital. This guaranteed return formula was abolished in 2002 under the deregulation policy.

The new formula allowed the refineries 10 per cent deemed duty on HSD which is over and above the international market prices. 

This 10 per cent deemed duty was allowed to keep refineries afloat in long-term. They were also directed to retain all profits in excess of 50 per cent on their paid-up capital and transfer the same to ‘special reserves’. 

Despite the availability of over Rs15 billion in their reserves, the report deplored, refineries hardly utilised this amount for upgradating their refining units or improving the quality of their products. 

The report, however, acknowledged that despite having made this industry a major revenue collection source, the government had sometimes cushioned the masses against inflation in oil prices in world markets.

The report also deplored that despite the setting up of Ogra on March 28, 2002, the function of price fixation had not been transferred to the authority.

While approving the summary in haste, the cabinet decided that until the formation of a regulatory authority, fixed sale prices announced by Oil Companies Advisory Committee (OCAC) would be monitored and regulated by DG (Oil).

But there is nothing on record whether the prices were actually monitored and regulated, the report said.