KARACHI, July 12: The government is expected to fully deregulate diesel imports and its prices in the next two to three weeks and as a result of this, the Oil Companies Advisory Committee (OCAC) will discontinue determining its prices.
This was stated by managing director, Pakistan State Oil (PSO), Tariq Kirmani in a chat with Dawn at PSO head office on Friday.
“I think diesel, which was already deregulated to the extent of 75 per cent by the government, is likely to be fully deregulated from first week of August as everything is done,” he said.
The government had actually decided to deregulate diesel imports and its prices from July 1, 2002 but it was delayed for at least a month.
As part of deregulation process, oil marketing companies (OMCs) had already been allowed to import diesel on cost competition basis so that the consumers could benefit from it.
Currently, PSO imports 65 per cent of diesel as per contract with Kuwait Petroleum Company while the rest is mainly bought by Shell Pakistan Limited and Caltex Oil Pakistan by awarding import tenders to the Royal Dutch Shell and Caltex Corporation and international oil trading companies.
An average price is taken from these OMCs to announce fortnightly prices in order to maintain a uniformity all over the country as per government formula.
Now, he said, OMCs have been given a free hand to import the product from their own sources and fix the ex-depot prices on the basis of import cost competition and supplies from local refineries instead of present system of averaging out the import cost among the three main OMCs.
In order to benefit the consumers, he added, that OMCs will maintain their respective prices at 29 depots uniform and only inter-company prices will differ from each other on same locations.
Refineries will also set ex-refinery prices based on the average of Middle East oil products prices over the previous 15 days.
In the whole process of diesel deregulation, the PSO MD looked quite unpleasant in case licences are issued to commercial players, importers and traders to import diesel. “It will be a complete disaster for the OMCs as these traders will start selling cheaper diesel to the consumers and prices would go out of control,” he observed.
“Only those new OMCs, which get licence and approval from the Oil and Gas Regulatory Authority (OGRA), should be allowed to market and import diesel rather than traders and commercial importers,” Kirmani said. “I think the government is actively looking after this issue not to allow private parties to import and market diesel who have no proper set up,” he added.
Answering a question why the government has imposed a 10 per cent ad valorem import duty on diesel in the 2002-03 budget, he said the government is actually trying to curtail the gap between petrol and diesel to bring in line prices with the worldwide trend where prices of both key commodities are same.
The government is working on as to how to improve the pricing mechanism. The OMCs have submitted a proposal on this issue in such way that it could not hurt the on-going competition between the OMCs and consumption pattern of oil products.
