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Govt to pay two OMCs Rs500m in compensation

Updated January 27, 2018

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ISLAMABAD: The government has decided in principle to pay about Rs500 million to two leading oil marketing companies – Pakistan State Oil and Shell Pakistan – to clear compensation claims which had been pending for almost three years.

The relevant stakeholders have already reached an agreement on the compensation, outstanding since April 2015, and have moved a case to the prime minister for formal approval of the Economic Coordination Committee (ECC) of the Cabinet.

A summary seen by Dawn suggests the Federal Board of Revenue (FBR) had imposed 2.5 per cent Regulatory Duty on imported High Speed Diesel (HSD) and 2pc on petrol and petroleum crude oil on April 30, 2015.

After the issuance of said notification, the erstwhile Ministry of Petroleum submitted a summary on July 3, 2015 to the ECC for seeking approval on two proposals to recover these duties form consumers.

Under the first proposal, the OMCs and refineries should be in principle allowed to account for statutory duty such as subject duty in monthly prices of petroleum products, being part of actual cost of petroleum product.

Secondly, since said notification or RD was received by the petroleum ministry on May 4, 2015 while the prices of petroleum products had already been notified April 30, therefore the impact of said duty on MS and HSD could not be passed on the consumers through ex-depot sale prices effective from May 1, 2015. Despite the fact that OMCs paid regulatory duty during the month of May 2015, resultantly respective OMCs should be allowed to recover such arrears from subsequent monthly prices through Oil and Gas Regulatory Authority (Ogra), the then summary argued.

The ECC took up the summary on July 8, 2015 and approved the proposals. However, it advised regarding the second proposal that recovery from consumers should be subject to condition that claims should be got verified and reconciled on the basis of actual volumes of products from FBR, Ogra and the petroleum ministry.

The subject remained under controversy on various counts and it more than two years to reconcile volumes and related data. Accordingly, Ogra has now verified the requisite claim and prepared a verification report based on the information provided by FBR for submission to ECC. The report was reviewed by this petroleum division which held that the regulator had correctly prepared the claims in the light of the ECC decision.

The petroleum ministry has now submitted that it “transpired from the said report that Ogra after carrying out verification, worked out net claim of Rs482.13m” including Rs357m payable to PSO and Rs125.22m to Shell which could not be recovered by OMCs through monthly prices of May 2015.

The ministry has now requested the ECC to allow the recovery of said amounts through the coming month’s petroleum prices and be paid to OMCs under the existing pricing mechanism in succeeding months through Ogra.

Published in Dawn, January 27th, 2018