The federal government’s efforts to maintain the petrol prices in Pakistan for the second consecutive time could cause Rs. 7.55 billion loss to the struggling oil industry. An oil companies SOS letter stated that it could also lead to disruption in supply chains.
Concerns of OCAC
The Oil Companies Advisory Council (OCAC), in its letter to the Minister of State for Petroleum Division, said the government had kept the fuel prices unchanged from November 16 to December 1, 2022, at the cost of the oil industry. The letter pointed out that prices were increasing under the government-approved pricing formula.
However, the current government, “instead of passing on the increase to the end consumers or absorbing the impact by reducing the petrol levy, has reduced the Inland Freight Equalization Margin (IFEM), Exchange Loss Adjustment, and Margins of oil marketing companies (OMCs)”. And this will cause a massive loss of Rs. 7.55 billion in the next fortnight.
The letter also mentioned that the oil industry in Pakistan is already facing a severe financial crunch due to high international prices, rupee depreciation against the US, increased letter of credit confirmation charges, and a high premium on imports. “The industry would not be able to survive if these adjustments were not removed immediately,” the OCAC demanded.
The OCAC has urged the government to hold an urgent meeting with the industry representatives to ensure the survival of the oil industry and avoid any supply chain challenges.
No Change in Fuel Prices
On November 15, Finance Minister Ishaq Dar announced that petrol prices in Pakistan will remain unchanged for the second half of November 2022.
Mind you, Ishaq Dar took the same decision on October 30 and retained petroleum prices. The minister stated he consulted the summary with Prime Minister Shahbaz Sharif and decided against increasing the prices.
Current Petrol Price in Pakistan
On September 30, newly appointed Finance Minister Ishaq Dar announced a massive slash of Rs. 12.63 in petrol prices in Pakistan.
Petrol now costs Rs. 224.80/liter from the previous rate of Rs. 237.43/liter.
Meanwhile, the price of HSD was dropped by Rs. 12.13/liter, after which the new price is Rs. 235.30/liter.
Similarly, LDO and kerosene oil prices decreased by Rs. 10.19 and Rs. 10.78, respectively. Kerosene oil now costs Rs. 191.83/liter, while the new price of light-speed diesel is Rs. 186.50/liter.
Freight equalization margin is responsible for keeping noncompetitive companies in the market. Should it be removed the companies will need to compete on good freight charges to keep there running costs low; instead they are right now looking at the government to keep prices in Mansehra and Karachi same but at the same time these looters of OMCs have been dumping the same Mansehra or Peshawar shipment in Lahore or other close by districts and getting billions inclaims from government. The government should completely withdraw freight equalization margin