ISLAMABAD: The Competi­tion Commission of Pakistan (CCP) has suggested to the Oil and Gas Regulatory Authority (Ogra) and the petroleum ministry to eliminate Inland Freight Equalisation Margin (IFEM) and create a level-playing field for all refineries and oil-marketing companies.

The opinion was formed after a public hearing by the CCP, which was attended by representatives of the petroleum ministry, the Ogra, refineries and oil-marketing companies.

The CCP also took notice of concerns raised by an oil refinery in respect of benefits of IFEM denied to it by Ogra and the petroleum ministry, which discriminate against one refinery.

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IFEM is the cost of inland movement incurred by a refinery for transportation of crude oil from source to refinery; and by an oil-marketing company for transportation of finished product from supply point to depots in the country.

The purpose of IFEM is to maintain the prices of petroleum products, including petrol, high-speed diesel, light diesel oil and kerosene across the country.

Ogra has denied transportation cost of crude oil to the refinery as there are two conflicting decisions of the Economic Coordination Committee (ECC). One decision disallowed crude transportation to the refinery while the other has allowed the same, but the petroleum ministry did not seek approval of the ECC regarding rescinding its earlier decision.

From the documents available to the commission, it stands clarified that an informed decision has been made at the forum of ECC while allowing the refinery reimbursement of transportation cost from IFEM. The CCP has observed that investment incentives are given to allow players to enter the market/or expand their businesses.

“Investment incentives cannot be offset by denying benefits normally given to existing market players, besides the IFEM is an indirect subsidy given to residents of Pakistan by covering the transportation costs of the refineries and oil-marketing companies to ensure that their products are available to consumers at a uniform price across the country,” the CCP opinion said.

Published in Dawn, August 8th , 2014