Govt plans to pull out of fuel pricing process, giving OMCs free hand

ISLAMABAD: Aiming to put an end to its intervention in the fuel pricing process, the federal government is set to transfer this responsibility to oil marketing companies (OMCs), sources said on Wednesday, primarily to let market forces decide the rates.

Oil sector analysts says this move is part of a phased plan to deregulate the petroleum sector and allow market-driven product rates. The deregulation proposal seeks to empower the OMCs to determine fuel prices based on various market forces, they added.

However, local consumers getting petrol and diesel from places closer to ports and refineries would get relatively cheaper products due to the transportation cost.

Prime Minister Shehbaz Sharif has directed that the government’s powers to fix the prices of petroleum products be abolished. In response to this directive, Minister for Petroleum Musadik Malik has convened an important meeting scheduled for tomorrow.

“Petroleum Division has been directed to finalise and present the deregulation framework for the petroleum sector. The Minister for Energy (Petroleum Division) has been pleased to convene a meeting on Thursday,” said a notification issued by the Ministry of Energy (Petroleum Division).

As per the notification, the Oil and Gas Regulatory Authority (Ogra) has been tasked to present the subject matter along with analysis, implications, and a way forward for deregulation of petroleum products.

“Accordingly, Ogra is also requested to provide the requisite presentation at the earliest as the same is to be discussed in the said meeting,” the notification said.

When ready, the final framework for deregulating petroleum prices will be presented to the prime minister.

However, this decision has met with fierce opposition from petroleum dealers. They have expressed concerns that granting oil marketing companies the authority to set prices might lead to unfair profiteering, impacting their businesses negatively.

On the other hand, the refineries said the deregulation could jeopardise nearly $6 billion of investment, as it is better to spend money on upgrading the refineries, according to a The News report.

Despite these objections, the government appears determined to move forward with its plan, aiming to create a more competitive and market-responsive petroleum sector.

The Oil Marketing Association of Pakistan (OMAP) last week appealed to Prime Minister Shehbaz Sharif to intervene and finalise a mechanism to recover exchange rate losses incurred by the industry.

In a letter to the prime minister, Chairperson of OMAP Tariq Wazir Ali highlighted the issue of unrecovered exchange losses due to flaws in the current system. These losses, he claimed, have accumulated to a staggering Rs26 billion.