Petrol prices likely to be deregulated

[Lahore_Real_Estate]

ISLAMABAD: With Punjab and remote areas in other provinces facing a severe shortage of petrol, mainly because of transportation problems and lack of storage, the government is expected to deregulate oil pricing on Tuesday and allow refineries to fix prices of petroleum products, except diesel, to improve their financial position.

The government is also considering to cancel marketing licences of oil companies which have failed to set up storage facilities in accordance with the law, leading to the drying up of their retail outlets and creating difficulties for commuters.

Petroleum Minister Syed Naveed Qamar told Dawn that the deregulation would result in an average increase of about Re1 per litre in petrol prices, although removal of the inland freight equalisation margin (IFEM) would reduce the prices of all products in major cities. “The impact of IFEM’s removal will be positive on all products.”

The deregulation will improve the financial position of refineries, except of the Pak Arab Refinery which has been facing the problem of circular debt.

The minister said the reservations of the Oil and Gas Regulatory Authority over the impact of removal of the IFEM on petroleum products calculated by the Pakistan State Oil (PSO) had been addressed.

A summary for price deregulation would be presented before the cabinet’s Economic Coordination Committee (ECC) on Tuesday, he said.

Mr Qamar said the Qadirpur gas field that had been shut early this month for annual maintenance and installation of compression facilities was back on stream, producing about 460 million cubit feet (MMCFD) per day that would increase to 600MMCFD by 2012 with the addition of more compressors.

Meanwhile, an official said the ministry had called an emergency meeting of oil marketing companies and refineries on Tuesday to seek explanation for the petrol shortage in some major cities in Punjab and remote areas in other provinces and Azad Kashmir, although stocks available in the country were sufficient to meet requirement of 18 days.

He said the marketing licence required the companies to develop storages for at least 20 days, but most of them lacked the facilities.

Except for the PSO, Shell and Caltex, no other marketing company had developed storage facilities or maintained stocks, the official said. He said 12 marketing companies were operating in the country. He said Ogra had failed to ensure compliance by the companies.

A ministry spokesman said that Mr Qamar had asked the regulator to check petrol pumps and cancel licences or impose penalties.

An official said that by and large there were no reports of hoarding but smaller companies were short of stocks because of transport problems and lack of storage.

He said that because of the closure of Parco after floods, the government had started moving products from Karachi to meet upcountry’s requirements.

This was followed by transport interruptions because of Eid holidays followed by the killing of MQM leader Imran Farooq, and then depletion of stocks in the Machike-Multan region. Since the smaller companies did not maintain stocks, pressure developed on the PSO, Shell and Caltex, wiping out their stocks as well.

Despite 80,000 tons of stocks, outlets in Lahore, Multan and Gujranwala have been short of supply since Eidul Fitr. The country consumes about 5,000 tons of petrol a day.

The official said the Parco refinery had now resumed operations and would be producing about 2,000 tons of petrol.

The Attock Refinery produces about 1,500 tons and meets the requirement of Rawalpindi and some areas in Punjab, Azad Kashmir and Gilgit-Baltistan.