Advance purchases, petroleum levy blamed for higher fuel prices

Published August 24, 2022
Senator Abdul Qadir (C) presides over a meeting of the Senate Standing Committee on Petroleum on Tuesday. — APP
Senator Abdul Qadir (C) presides over a meeting of the Senate Standing Committee on Petroleum on Tuesday. — APP

ISLAMABAD: The Senate Standing Committee on Petroleum was informed on Tuesday that advance purchases and imposition of the petroleum development levy (PDL) were the key reasons for the rise in fuel prices in Pakistan despite a drop in the international market.

The committee directed the authorities concerned to facilitate the private sector for importing liquefied natural gas (LNG) to reduce pressure on the national kitty and introduce competition in the petroleum sector.

Members of the committee, chaired by Senator Abdul Qadir, also voiced concerns over the abse­nce of Petroleum Minister Musadik Malik and the secretary petroleum from the meeting.

“We all, irrespective of political affiliation, feel that there was a need for stringent measures to reduce oil prices and facilitate the ordinary citizens of Pakistan,” the chairman of the committee said.

Senate body favours LNG imports by private sector to create competition

Answering queries of the committee members about an increase in petroleum prices despite a decline in world oil prices, petroleum division officials said the reason for the rise was advance purchases made before the petroleum rates dropped globally.

Another reason for higher fuel prices was the application of the petroleum development levy (PDL) each month to comply with IMF conditions, the officials said.

Meanwhile, Senator Taj Haider while raising a public concern stressed the need for encouraging competition in the fuel business and said the restrictions imposed by the government over the import of LNG by the private sector must be removed.

Briefing the committee, All Pakistan CNG Association President Ghiyas Paracha said the oil and gas market had to be open to private investors as well.

“Currently, LNG imports were limited to the public sector only and all the businesses run by the government sector were not as efficient as the private sector — because we do not have to move files for days to get a simple permission,” Mr Paracha told the committee.

He said foreign exchange worth around Rs84bn per year could be saved if the private sector was allowed to import LNG and that gas would be a substitute for petrol and diesel.

“We have an advantage that we will sell imported LNG at CNG stations and the general industry as a result foreign investments too will be back in this sector,” he added.

Responding to Mr Paracha, the Oil and Gas Regulatory Authority chairperson said the market was open and the regulator was in favour of open policy in this regard, as it would create competition, improving efficiency and reducing the cost of businesses.

“The open policy will de-monopolise the market, which was currently under the control of state-owned gas utility companies,” he added.

The company was informed that currently only one private company, the UGDC, was in a position to import LNG.

The officials of Sui Southern Gas Company (SSGC) said they were in favour of signing an agreement with UGDC while the SNGPL had to get the approval of its board of directors.

Senator Qadir gave the ruling for an early settlement of the issue so that the private sector could import LNG.

While the officials of Pakistan LNG Ltd told the committee that the company was working on short- and long-term LNG supply tenders, the feasibility of long-term tenders was not prudent for the government due to certain limitations, including adjustments with flexible demand in the country.

The decision in this regard will be taken by the ECC and the federal cabinet meeting.

Published in Dawn, August 24th, 2022

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