Govt plans to remove $15/barrel ceiling on HSD

KARACHI: Government might remove the ceiling of $15 per barrel premium on high speed diesel (HSD) to ensure its sufficient supply in the country, The News learnt on Tuesday.

The Economic Coordination Committee (ECC) approved the upper limit premium of $15 to the Oil Marketing Companies (OMCs) for price computation to ensure sustainable HSD imports to meet the local needs of the product last week.

The KPC premium for Pakistan State Oil (PSO)’s HSD cargoes for July-December, 2022 is $8.5 per barrel whereas in the international market premium on HSD has gone up to over $20 per barrel.

“Even after raising the premium to $15 per barrel, OMCs except PSO are finding it hard to import HSD, which poses risks to its smooth supply in the domestic market this month as well as the next month,” sources familiar with the development revealed.

Sources said that diesel was in short supply in the global market as most of the stock was being consumed by European countries, which pushed up the premium on its import.

PSO’s premium on HSD import is $8.5 per barrel which is added in the price. PSO imports from Kuwait Petroleum Corporation (KPC) on the basis of long-term contract.

“For spot cargo, OMCs pay $20 per barrel on HSD import. Government raised the premium in ECC meeting last week to $15 per barrel but it couldn’t offer the solution to the problem as OMCs are not able to absorb $5 per barrel difference,” sources said.

The Oil Companies Advisory Council (OCAC) in a confidential letter, which The News published, also pointed out the looming crisis of petroleum products, especially HSD, in the country. Although the oil body publicly announced that increasing trend of sales products in November and vowed to strive the supply of oil products in the country.

Sources, however said that situation was not stable for the supply of HSD as the premium of $15 per barrel was not pushing the OMCs to import HSD, which disturbed the local supply of the fuel.

Sources disclosed a high level meeting of Petroleum Division and oil sector was held on Tuesday, in which the issue of availability of HSD was discussed threadbare.

According to the sources, OMCs pressed the ministry to remove the ceiling of $15 per barrel premium on HSD import, which was agreed upon, and would be presented in the next meeting of the cabinet for approval.

Sources, however pointed out that removing the ceiling on premium would add in the prices of HSD for end consumers.