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Marketing firms to fix oil prices from Sep 1

August 15, 2012


Fuel station employee displays new prices of petroleum products at a fuel station in Karachi on Wednesday, August 01, 2012. Pakistan Oil and Gas Regulatory Authority (OGRA) were increased petroleum products and CNG prices by up to 8.9 percent due to the global rise in oil. (S.Imran Ali/PPI Images).
–PPI File Photo

ISLAMABAD: The government has decided to pull itself out of the process of fixing prices of major petrol products, limit the role of the Oil and Gas Regulatory Authority (Ogra) and allow marketing companies to fix retail prices with effect from Sept 1.

It is believed the government hopes that the decision would divert the public anger over oil price increases towards oil marketing agencies.

Ministry of Petroleum and Ogra officials said that the Economic Coordination Committee (ECC) of the cabinet had decided back in 2009 to deregulate oil pricing and directed the petroleum ministry to gradually transfer the responsibility of determining prices to marketing companies.

For some time, the companies have been fixing the price of high speed diesel (HSD) but major political parties started criticising the government over increasing prices of other products.

Officials said a recent ECC decision to revise oil pricing on a weekly basis had made it impossible for Ogra to complete the process within a week and submit it to the ministries of petroleum and finance for approval.

Coupled with this, the government fixed the amount of per litre petroleum levy on all products through the Finance Bill 2012-13 and hence it was felt that there was no justification for Ogra to notify oil prices.

The government currently charges a levy of Rs10 per litre on petrol, Rs14 on HOBC, Rs6 on kerosene and Rs8 on HSD. In addition, the government also collects 16 per cent general sales tax on the products. The amount charged fluctuates between Rs14 and Rs17.

Hence it was decided last week that oil companies should assess product prices, share findings with Ogra for informal vetting before issuing a notification on their own.

If at any time, the government felt that the impact of price hike was too high it could always step in by lowering its share of petroleum levy by advising the marketing companies to reduce the levy.

A petroleum ministry official said the measure was taken after complaints that whenever the government decided to raise prices the media leaked the actual hike a few days before the announcement.

This resulted in scarcity of products as retailers took recourse to hoarding and black marketing.

An official of the state-run Pakistan State Oil (PSO) said the system of weekly pricing would cause confusion under the given circumstance and might have to be withdrawn in three to four months.

He said the PSO, being the largest oil importer and supplier, sometimes received two shipments a week while in some weeks it received no shipment at all.

“The pricing is going to be very erratic and create public unrest,” he said.

He said the marketing companies would start fixing prices from Sept 1 because the government had decided to maintain oil prices at the existing level for the next fortnight.

Ogra will be responsible for keeping an eye on retail outlets across the country through its enforcement wing and ensure that the retailers provided fuel to motorists.