KARACHI, Aug 30: The Oil Companies Advisory Committee (OCAC) will now hand over the process of regulating diesel prices to the oil marketing companies (OMCs) from Saturday under the government’s deregulation plan starting September 1.
“OMCs will set the fortnightly diesel prices on their retail outlets according to price mechanism set by the government. The OCAC will continue to regulate prices of other products,” external affairs director of Shell Pakistan Limited (SPL), Saleemuddin Ahmed told a press conference on Friday at the SPL’s head office.
“There will be a variation in diesel prices at 29 designated locations after the deregulation as currently being observed in furnace oil,” he said, adding that one factor which would affect the end price is the global price.
Diesel prices, to be announced by the OMCs on Saturday, will be based on the base price according to Platts rate of the Arabian oil prices of diesel, besides depending on the rupee-dollar parity in the fortnight, he said.
Other elements which determine prices are: petroleum development levy (PDL), distributor margin (not more than 3.5 per cent of ex-depot price), dealer margin (not more than four per cent of ex-depot price), inland freight equalization margin, 15 per cent sales tax to maintain prices across the 29 depots, secondary freight plus sales tax on secondary freight.
Since the last one month, the government has imposed a deemed duty (import duty) of 10 per cent on diesel to equalize refinery prices. The OMCs used to pool on the imported cargo but from September 1, there will not be any price sharing between the OMCs.
The first shipment of 60,000 tons of diesel, imported by SPL, will arrive at the port on September 2, he said. Out of total demand of seven million tons of diesel, around 4.5 million tons are being imported annually. The share of Shell stands at 1.5 million tons per annum.
Saleemuddin said the government had not allowed private importers and traders to import diesel, and this decision would help prevent local markets from dumping of low quality diesel at cheaper rates.
He said deregulation of diesel would provide opportunities for competition and fair play among the OMCs. Companies will have the opportunities to increase efficiencies starting from purchase of international stocks to the time they are taken to the refinery, depots and finally to the petrol pumps and pass on the benefit to the consumers through an open price competition.
He said the OMCs would now constantly need to re-evaluate their stocks and inventories every fortnight in line with prevalent international prices. For which OMCs must have top of the line information system. He said that Shell had invested $18 million in information system to deal with this challenge.
On export of oil products, he said Shell was already exporting its products like diesel, petrol, JP-1 and LPG to Afghanistan. He said an SPL representative had been sent to Afghanistan with the EPB delegation to explore the Afghan market so that exports could be further increased.