ISLAMABAD: For icing diesel vacuity in the harvesting season amid unpredictable transnational request, the government on Friday allowed an increase in decoration charged to Pakistani importers by spot dealers for three months i.e. April-June.
The decision to this effect was taken at a precipitously called special meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Shaukat Tarin. The single- point meeting of the ECC was called at a short notice in the morning to address a grueling request situation.
A elderly government functionary said the ECC directed that there should be no deficit of product indeed if it was carried at a advanced decoration as a part of the impact of advanced decorations would be acclimated within the inland freight equalisation periphery (IFEM) by the controller and remaining to be picked up by the government.
All petroleum prices, including high- speed diesel (HSD), have formerly been firmed for four months by Prime Minister Imran Khan.
Only three members, out of 14, of the ECC attended the meeting. They included Minister National Food Security & Research Syed Fakhar Imam and Minister for Privatisation Muhammad Mian Soomro.
An sanctioned statement said the summary, moved by Petroleum Division, was meant to “ grease and give position playing field to canvas companies vis-à-vis PSO” and was approved with the direction to revise the decoration on a fortnightly base. “ Thus, its impact would increase or drop depending on the transnational energy request,” it added.
Under the decision, the HSD price computation would not be grounded on the decoration being charged by Pakistan State Oil’s long- term supplier – Kuwait Petroleum Company (KPC) – but on an normal of prevailing request- grounded decoration.
The meeting was informed that under the being pricing medium for HSD and petrol, the base price is fixed on the base of 15 days average FOB ( freight on board) prices of the Arab Gulf request ( published in the Platts Oilgram). For this base price, PSO’s last available average import decoration and Incidental charges ( including bank charges for letters of credit, pier, harborage charges, etc) are added to arrive at C&F ( cost and freight) prices for finishing the original consumer prices.
The decoration ( freight and supplier’s periphery) is a lump sum cost of the supplier/ exporter, which is either negotiated or offered in a tender process. PSO, being a public sector company, is obliged to land significances under the Public Procurement Regulatory Authority (PPRA) rules and regulations.
As per being arrangements, PSO imports its petrol conditions entirely through spot extending, while the bulk of its HSD significances is made from KPC on the base of a long- term agreement, which is revised or reviewed biannually. The decoration on a long- term base is lower than the tendered decoration. Presently, KPC decoration for PSO’s HSD loadings for January-June is$2.40 per barrel. In case, KPC is unfit to meet PSO’s HSD demand, the fresh significances are carried from the spot request. When PSO procures from both sources (KPC & spot request), the weighted normal of KPC and spot decoration is used as a standard to calculate the consumer prices.
Still, the Oil Companies Advisory Council (OCAC) had refocused to the government that HSD decorations for the assiduity had been historically advanced than PSO, inferring that the assiduity was importing HSD at a fairly advanced decoration as compared to PSO’s standard decoration. Due to this, the remaining OMCs are at a disadvantage.
This difference has now risen significantly due to the prevailing geopolitical situation. PSO’s tender for the alternate fortnight of this month opened at$8.45 per barrel whereas decorations are indeed advanced in the open request. The situation was similar that PSO didn’t admit any offer in their HSD tender for the first fortnight of April.
Since the current HSD price was benchmarked on the base of substantial significances by PSO from KPC ($2.4 per barrel), any canvas selling company importing at the PSO tendered decoration ($8.45 per barrel) would dodge a loss of over to Rs6.8 per litre, creating an unsustainable position for importers. “ Thus, the need for critical review the benchmarking process to save the assiduity from collapse”, the Petroleum Division contended averring that OMCs would be unfit to import HSD leading to a implicit deficit across the country.
The ECC approved the summary that KPC decoration be barred from price calculation for the period from April to June and decoration be benchmarked on PSO’s average tendered decoration for the former fortnight.
In case, there’s no tender by PSO in a particular fortnight, the decoration from the former tender would be used for calculating HSDex-refinery price.
As this arrangement may lead to some benefits for PSO and original refineries, this would be acclimated by Oil & Gas Regulatory Authority for recovery through the IFEM medium. This medium would be reviewed on the recommendation of the Canvas and Gas Regulatory Authority on a fortnightly base.