Staff Report
ISLAMABAD: The oil industry has voiced its concerns regarding alleged manipulation in the pricing mechanism of High-Speed Diesel (HSD), warning of significant inventory losses amounting to Rs. 11 billion.
Industry insiders have criticized the recent reduction in the price of HSD, labeling it as a “forced reduction at the cost of the industry.” They are urging immediate action to rectify the pricing issue and ensure the uninterrupted supply of fuel throughout the country.
In the second fortnight of July 2023, the government reduced the price of High-Speed Diesel (HSD) by Rs. 7. However, the Oil Companies Advisory Council (OCAC) has pointed out that this reduction deviated from the approved pricing formula established by the Economic Coordination Committee (ECC) of the Government of Pakistan. In a letter to the Chairman of the Oil & Gas Regulatory Authority (OGRA), the OCAC highlighted that the reduction was implemented by using an inaccurate Premium, rather than adjusting the Petroleum Levy or passing on the increase to consumers.
According to the OCAC, the application of an incorrect Premium and other incidentals in the price calculation is unjust and goes against the ECC’s decision. The government’s decision to use a Premium of $4.20 per barrel, instead of the approved $11.50 per barrel, has resulted in an anomaly in the pricing mechanism. This discrepancy has created significant inventory losses for the oil industry, estimated to be around Rs. 11 billion, further exacerbating the financial challenges faced by the already struggling sector.
The OCAC emphasized that the manipulation in pricing needs immediate rectification through a price revision. The industry is already grappling with insufficient margins, increased markup, high global oil prices, and the depreciation of the Pakistani rupee. Failure to address the issue promptly could have severe repercussions, potentially jeopardizing the stability of the oil industry and hindering the uninterrupted supply of fuel across the country.
The oil industry is calling on the relevant authorities to address the concerns raised and take corrective measures to ensure fair and transparent pricing practices. Industry stakeholders emphasize that a timely price revision is essential to mitigate the adverse effects on the industry and enable it to continue providing vital fuel supplies to meet the nation’s energy needs.
