Ministry calls out refiners over higher GRMs

KARACHI: The government has sought comments from the oil sector on gross refinery margins (GRMs), which have been on the higher side in the last three months, The News learnt on Monday.

The Petroleum Division asked the refiners to give their input after it was reported that GRMs have surged in the recent months. According to a source, after media reports about the GRMs proposal were floated in subsequent reports that margins on high speed diesel (HSD) and petrol should be capped to reduce their prices for the end consumers.

The GRMs rose sharply to $37/barrel in May 2022 against $24/barrel in April of this year. The source said the GRMs jumped in the last three months; however, they had been on the lower side in the preceding last several months.

The official said now when the GRMs were on the higher side, they wanted to bring them down, but nobody said a single word about the huge financial losses of Rs62 billion the refinery sector incurred in the last twenty years.

He added that before the oil sector policy for the year 2002, there was a minimum rate of return of 10 percent and maximum 40 percent for the refineries and in case of less than ten percent minimum return, the government had to compensate the refineries.

However, no financial assistance was given by the government to the refinery sector and their cumulative losses surged as a result, the official said. The News also learnt that under the 2002 policy, a net profit of a refinery, above 50 percent paid-up capital, is to be deposited in a special reserve fund to utilise it for the expansion and upgradation of a refinery. The policy prohibits the use of the amount in the special fund to offset the losses of refineries and it even cannot be given out as dividends to shareholders beyond a certain percentage i.e. ten percent.

The high GRMs are attributed to widening spreads on high speed diesel and furnace oil. Attock Refinery’s GRMs were calculated at $31/barrel in May against $21/barrel in April. For National Refinery Limited gross margins arrived at $38/barrel in May against $23/barrel in the preceding month of the same year. The GRMs for Pakistan Refinery Ltd turned out at $37/barrel in May 2022 versus $23/barrel in April this year.