KARACHI, March 15: Despite a 20 per cent reduction in oil marketing companies (OMCs) and dealers’ margin under new pricing formula-the prices of all the petroleum products have been kept unchanged on Wednesday.

Consumers, who were expecting cut in prices, might be feeling surprising as to why the government has taken the decision to change the formula when it has not provided any relief to the end-users.

Even the Oil Companies Advisory Committee (OCAC) has not mentioned any thing about the new formula in its press release issued on March 15. The petroleum ministry had instructed the OCAC on March 7 to work out OMC’s distribution margin and dealers’ commission from March 16, 2006.

The government has changed the pricing formula for fixation of oil prices in view of energy experts’ anticipation that the high oil prices would hold sway in future due to low spare output capacity of crude oil, lack of investment in refining, growth in global demand and involvement of hedge funds in the future market.

Chairman Pakistan Petroleum Dealers Association (PPDA), Abdul Sami Khan, said that the association was expecting a decline in prices after the March 7 decision but the OCAC had kept the prices unchanged.

He said that there were two possibilities: either the OCAC has not implemented the ministry’s decision or in case they have implemented – the benefit, which was supposed to be passed on to the consumers, has gone into price differential claim (PDC).

Previously, the OMC margin at the rate of 3.5 per cent and dealers’ commission at the rate of four per cent was calculated on ex-depot sale price inclusive of general sales tax.

The petroleum ministry has asked the OCAC that these margins should be worked out as per new pricing formula before levying the general sales tax.

Sources in oil trade said that the OCAC has implemented the new pricing formula as per government instruction but it is not clear why it did not mention in its statement.

An analyst said the government might have increased its share of taxes or the ex-factory prices of oil may have increased, that is why the consumers could not see the impact of cut in margins on the end products’ prices.

General Secretary OCAC, Abid Saeed Ibrahim said that the increase in international oil prices have virtually absorbed the impact of reduction in OMCs and dealers’ margin under new pricing formula.

Due to increase in diesel prices in Arab Gulf market to $68 a barrel – the impact of decrease in margin was nullified and in addition the PDC of 92 paisa per litre was created which is presently being borne by the industry to be claimed from the government amounting to Rs350 million for the current fortnight. The present outstanding of the oil industry is approximately Rs4 billion on account of PDC.