ISLAMABAD, Oct 11: Pakistan has asked the World Bank to help improve its oil pricing mechanism that has been under criticism for over six years because of its reported tilt towards oil industry.
“We have sought World Bank’s assistance for further improving the oil pricing mechanism,” secretary petroleum Ahmad Waqar told Dawn on Wednesday.
He said the bank was expected to submit its report on new oil pricing mechanism within the current year.
Meanwhile, a meeting of the National Assembly’s standing committee on petroleum that was scheduled to be held Oct 13 has been cancelled after Prime Minister Shaukat Aziz held a meeting with speaker Chaudhry Amir Hussain. The committee had taken a serious notice of maintaining higher petroleum rates despite a sharp decline in international oil prices and had fixed the Oct 13 meeting and instructed the petroleum ministry to produce the full record of pricing pattern in the Gulf as reported by the Platt’s Oilgram and its impact on ex-refinery prices in Pakistan.
Sources told Dawn that the prime minister had discussed the issue with the speaker and took him into confidence about the proposed price reduction. An official close to the prime minister said that it was felt that there was no need to embarrass the government only two days before the revision of petrol prices as the objective of the standing committee meeting would be achieved on Oct 15.
Mr Ahmad Waqar said it was not necessary for the government to accept the bank’s recipe in its entirety but hopefully a revised pricing mechanism would be in place by early next year.
He agreed that prices of petroleum products and crude oil had shown declining trend in the international market during more than 45 days and the reduction had been utilised to adjust petroleum differential claims and subsidy on kerosene and diesel.
He said the differential claims payable to the oil companies and refineries had touched Rs23 billion because of the higher international market prices, including an Rs7.5 billion accrued between July 1 and Sept 30.
He said that the government had announced a policy in the budget to use petroleum development levy to subsidise some products instead of raising revenue but did not say how Rs10 billion budget allocations for oil subsidy would be utilised.
Mr Waqar evaded disclosing the exact size of the proposed reduction in deemed duty on petroleum products, saying the question should be referred to the Central Board of Revenue. The government currently charges deemed duty at 6-10 per cent on four products, mainly produced locally to protect refineries while high-speed diesel is also imported in large volume under a similar customs duty.
The bank had recently criticised the government’s petroleum pricing policy and had suggested to do away with the products review committee. It said market competition remained the best approach in further deregulating Pakistan’s petroleum markets. The number of players, the location of markets, and the infrastructure supported a competitive framework, it had said.
It, the bank said, would require the refineries and the oil marketing companies to take market risks, and produce or import in accordance with their anticipated requirements as well as exploit opportunities in international or domestic markets.