The government is acting fast to change the rules about how much petroleum products can cost. They want to fix the problem of fuel prices going up and stop smugglers from selling oil illegally.
The Petroleum Division told the Oil and Gas Regulatory Authority (OGRA) to study what will happen if they stop controlling the prices of petroleum products. They want to know the effects in three days. The goal is to make people blame oil companies, not the government, for any issues.
Deregulation means that oil companies can decide how much to charge for MS petrol and high-speed diesel (HSD) in different cities and towns. While petroleum prices are already not controlled by the government by law, the prices for kerosene are still set by the government.
With the new plan, OGRA and the Competition Commission of Pakistan would have a bigger role. They would make sure that the products are good quality, available, and priced fairly to stop companies from working together unfairly.
Pricing independence
An official informed Dawn that once the federal cabinet and the Special Investment Facilitation Council (SIFC) give their approval, the final plan for deregulation will be ready. Under this plan, petrol and high-speed diesel (HSD) prices won’t be the same everywhere anymore. Oil companies will have the freedom to set their own prices for different cities and towns.
Legally, petroleum prices are already not controlled by the government, except for kerosene prices at retail stores. For products like petrol, HSD, and light diesel oil, the government only sets tax rates, like the petroleum development levy, customs duty, and sales tax. They also fix profit margins for dealers and marketing companies. Ogra and the Ministry of Finance adjust the IFEM, which currently ensures the same pricing across Pakistan.
Now, the government is likely to completely deregulate petrol and diesel prices, including commissions for OMCs and dealers, following the HOBC pattern. In this new system, Ogra and the Competition Commission of Pakistan would have a bigger role in ensuring good product quality, availability, and fair competition, despite their limited resources.
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This also means the IFEM mechanism would be deregulated. So, prices would vary significantly between cities and oil companies. Consumers near ports and refineries might get cheaper rates, while those far away might have to pay more, with differences ranging from Rs3 to Rs8 per liter, depending on transportation costs.
The Oil Companies Advisory Council (OCAC) recently told the government about the bad effects of smuggling on the money the government gets and on local refineries. They worry it could stop plans to make refineries bigger and better, which would help the environment.