LAHORE, Jan 19: Experts in oil sector have asked the government to bring in transparency in the price fixing mechanism and place it under the Oil and Gas Regulatory Authority.

Lamenting the government’s decision to keep OGRA out of the price fixing mechanism and give a free hand to five oil importing companies, they say this might be disastrous for consumers.

“At present, no one knows how these companies fix price of oil every fortnight,” says an official from the Federal Ministry of Petroleum.

Though the ministry has given them a formula, but it has no control over the data that these companies use to calculate the price. Dilating upon the point, he says that the companies can either use last 15 days’ price to get an average price or they can use the figures of the actual procurement. Both can differ widely and cost people millions of rupees. Since the government has no control over the data used for the price mechanism, the companies are at liberty to use one of the two figures that suit them, he says. “The difference between both can be millions of dollars and hike the price substantially. The government must evolve a system to keep a check on the data these companies use.”

The government has compounded its mistake by asking OGRA to keep out of the price fixing mechanism, says an official of the authority.

Sections 23(2) and 26(4) of the OGRA Ordinance dealing with oil, LPG and CNG activities have been suspended and shall come into force through a separate gazette notification. The government has authorized the oil marketing companies to fix prices on a competitive basis. Due to this limit imposed on OGRA, it cannot become an effective regulatory authority nor can it intervene in the price fixing, he said.

“The government must learn from the National Electric Power Regulatory Authority where the Water and Power Development Authority has to justify every paisa for power tariff increase,” says an official of Wapda.

On the one hand, the government has put the power sector in straight jacket of regulatory mechanism and on the other, it has left the oil sector at the mercy of the marketing companies. The exorbitant profits of these companies are in addition to their high profits from the other heads, he added.

Another source of trouble for consumers is the price-linkage created between the domestic production and international oil prices, says experts from Lahore.

All domestic oil refineries are allowed to adopt the prices fixed by these marketing companies. One fails to understand the logic behind this decision. “Why has the government allowed these companies to charge international price for cheaper domestic production?”