ISLAMABAD: The government on Tuesday decided to shift monthly oil pricing to fortnightly basis and ordered import of 300,000 tonnes of sugar to control rising prices.

The decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh. The meeting also decided to sell unutilised capacity of the Liquefied Natural Gas (LNG) terminal owned by the government and allow third-party access to private entities.

On the request of the Petroleum Division, the ECC also decided to adopt a revised pricing methodology for motor gasoline (petrol) and high speed diesel (HSD) on a fortnightly basis, based on Platt’s average to facilitate oil marketing companies (OMCs) in minimising their inventory losses and improve cost recovery. It was argued that the new system would ensure fair competition, lead to alignment of margins with international pricing trend and smoothing out of volatility and distortions because of purchasing dates of one OMC.

Approves fortnightly review of petrol, diesel prices from Aug 1

The revision of oil prices on fortnightly basis, coming into effect from Aug 1, subject to endorsement from the federal cabinet, would also allow for planning three months ahead with refineries and OMCs, better inventory management, better reporting of sales and enfor­cement of stock requirem­e­­nts, transparency and visibi­lity of prices and reduced de­­­pendence on one OMC — Pakistan State Oil (PSO), said an announcement.

As per the existing system, prices of petroleum products are determined by allowing refineries to fix and announce the ex-refinery sale prices on a monthly basis subject to the condition that the ex-refinery price of the products cannot be more than the PSO’s average actual landed import price of previous months.

Under the new methodology, the price would be based on Arab Gulf Platt’s daily average for the number of days (15 days) in the pricing period (using mid point of bid and ask) as the base commodity price. Premium above Platts, freight and incidentals would be taken as average of the PSO’s procurement for the pricing period, and added to the base commodity average price.

Taxation and levies would remain at applicable rates even though the Ministry of Finance was advised to consider the possibility of making a certain portion of Petroleum Levy, say Rs5-10/liter to cushion the volatility in prices by keeping a running account. The exchange rate would be used as provisionally available, for PSO, but to be converted to actual upon retirement of letter of credit (not later than 60 days).

It was thus decided that the period of price applicability to be fortnight, i.e. first day of the month to 15th and from 16th till the end of month.

Sugar imports

The committee also gave a go-ahead to a proposal by the Ministry of Industries and Production allowing import of up to 300,000 tonnes of refined white sugar to maintain buffer stocks and prevent shortage in the coming months before the start of next crushing season.

The ECC also constituted a committee comprising secretaries of finance, industries and commerce to finalise a mode of procurement and other modalities for sugar import. The ECC also asked the committee to seek input from the Law Division on the preferred mode of procurement and report to the ECC in the next meeting.

On a proposal by the Finance Division, the ECC also approved upgradation of the Habib Bank Limited representative office in Beijing to branch and remittance of RMB 300 million to be used as capital of proposed branch from Pakistan.

The ECC also discussed a proposal by the Ministry of Energy for third-party access to LNG terminals to use excess capacity or government contracted unutilised capacity and approved the proposal for its sale. The ECC was informed that the government was losing $32-43m every year due to about 400mmcfd of idle capacity of second terminal — Pakistan Gas Port — resulting in higher processing charges burdening consumers.

The ECC also allowed exe­m­ption from the Re-lending Policy of the Government of Pakistan a proposal by the Ministry of Climate Change for seeking a loan of $20m from the French Deve­lop­m­ent Agency to fight against Covid-19 pandemic and strengthening health workforce capacity, adopting inf­ection minimisation measures and supporting implementation of Covid-19 National Action Plan across the country.

The ECC also considered and approved a technical supplementary grant of Rs340m for the operationalisation of Swat Motorway.

Published in Dawn, July 29th, 2020