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Plan worked out to save Rs43b per year on import of petrol

March 17, 2020

ISLAMABAD: The government has worked out a plan to ensure savings of $273 million (Rs43 billion) per year on import of petroleum products. The savings may be used either in lowering the price of petrol for end consumers or utilized for any productive project in oil and gas sector.

And to this effect, top mandarins of the Petroleum Division gave a presentation to Prime Minister Imran Khan some days back as a part of out-of-box thinking to bring down the petroleum products' prices with an aim to provide relief to masses.

The top official, while sharing the plan, said that the petrol cost has two main components that include cost of petrol as per quality and supplier premium. The official said the prime minister has been told that on supplier premium, there is a room to slice down the petrol price by $3 per barrel, arguing that premium consists of freight, insurance, incidental charges and margin of supplier and if the large vessel of 60,000 tonnes of petrol is arranged, instead of existing small ship of vessel of capacity to carry 25,000-30,000 tonnes of Motor Spirit, the price of petrol can be reduced by $3 per barrel.

And more importantly, if the decision is taken to go for government-to-government arrangement for import of petrol on long term basis, the price of petrol can also be further reduced by $1-2 or more. The official also argued saying that last year, Pakistan State Oil (PSO) imported 45.5 million barrels petrol and if kept in view the said quantity of petrol, Pakistan can save about $136.5 million just in the head of supplier’s premium. And if the g-to-g deal for import of petrol is arranged, including the facility of deferred payment, then the savings will go up to $273 million per year. The deferred payment facility would also reduce the agony of debt burden of Pakistan State Oil. "The PSO board has started fine-tuning the plan after the presentation by the Petroleum Division before prime minister."

To a question, the official said that Pakistan can have options to go for g-to-g deal with the UAE and other gulf countries. "However, Oman has the cheapest fare as it is nearest to Pakistan."

In that particular meeting, the prime minister was quoted as saying if the plan was doable while pointing at the managing director of Pakistan State Oil who was also present in the meeting. "The MD PSO in turn responded, Yes.”

The official said that PSO is the biggest importer of petrol and in last year, 27 bids to import petrol were arranged by PSO. Most of the oil is currently bought through various oil companies and petrol cost meets Platts Oil Gram rate but supplier premium is much higher and international shipping carriers are used, which cost in US dollars. “We have identified some faults in procurement of petrol and if it is improved, then massive savings can be ensured.”

Highlighting the way forward, the official said that the authorities concerned will calculate the annual demand and float tenders on -/+10 percent, will go for long term contracting of at least 1 to 3 years and will arrest the advertisement cost for PSO and get better terms in cost, fare, insurance and other incidentals. The authorities will go for g-to-g arrangements to ensure better price at the top Platt Oil Gram rate at US dollar 1 to 2 more. Apart from it, under g-to-g deal, deferred payment facility will also be ensured to save PSO from default. The deal will also help develop long-term relationship and bring investment in oil and gas sector. The official said that Pakistan National Shipping Corporation (PNSC) will be used for import of petrol and PNSC will be paid in Pak Rupees and forex invested for buying more petrol.

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