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Friday March 29, 2024

Fuel deregulation to improve efficiency in supply chain

By Javed Mirza
December 11, 2016

KARACHI: A government’s decision to lift fuel price controls gives market forces greater sway and will also attract energy investment, boost competition and cut subsidy costs, an industry official said on Saturday.

“Market-driven pricing will encourage product differentiation, supply chain cost optimisation, superior forecourt services and consumer benefits,” Nadeem Jafarey, chief executive officer at Admore Gas Pvt said. “Hitherto, the dealers and distributors are benefiting from volume discounts.”

The government allowed the import of Euro-II gasoline – research octane number 87 and 92 – under the deregulated regime. “I believe that the deregulation of the petroleum downstream sector, including pricing will benefit all the stakeholders in the long-run and bring about more efficiency in the supply chain,” Jafarey said.

“It will also remove current inefficiencies in the form of inland freight equalisation margin, which unfortunately continues to be abused.” Admore is the youngest oil marketing company (OMC) in Pakistan with a nationwide network of 471 retail outlets. The company has almost doubled its market share recently to two percent from 1.3 percent.

“We are currently consolidating and refurbishing our retail outlet network and plan to re-launch our brand,” Jafarey said. The company is also improving product range and availability of its products nationwide.

He said the Oil and Gas Regulatory Authority (Ogra) is doing a good job. “We are not facing any regulatory hurdles. It (Ogra) has to play a balance between protecting the interest of the consumers and facilitating the industry to improve standards as well as ensuring that a level playing field is available to all the market participants.” 

Admore chief said influx of smuggled products pose a threat to the market players, government and end-consumers. “The government runs short of legitimate duties and taxes. Consumers buy low-quality smuggled product, which does not meet OEM (original equipment manufacturer) standards, and end up destroying their car engines,” he added.

He said the government can support smaller companies by improving the oil products’ availability through a more efficient oil import and port handling process and ensuring that they are provided with reasonable portions in shared cargos and from refineries, especially in case of fuel shortage situations.

Jafarey said new smaller local companies should be encouraged and given time to develop storages and comply with other regulations, so they have a fair chance of developing into strong and viable businesses.

He said Admore’s expansion plans are currently underway. The company planned optimisation and development of retail outlet network, supply chain restoration, upgradation and building of storages and installation of an enterprise resource planning system.