Petroleum price deregulation hits snags without progress on ToRs

KARACHI: Government’s move to deregulate the petroleum prices has apparently hit a snag as there has been no progress on the terms of references (ToRs) in this regard, industry officials said.

The cut-off date for deregulation of petroleum prices was November 1, 2022, but the ToRs have not been finalised yet. A major reason for the slowdown in the deregulation process has been the change at the Finance Ministry, with the helm of affairs given to Ishaq Dar, the new finance minister of Pakistan.

“Former Finance Minister Miftah Ismail was ready about the deregulation of petroleum products after he was convinced to do it,” a source said; however, Dar announced he would revisit all the policies, and deregulation of petroleum prices also falls among the policies that the minister plans to revisit.

Apart from slow movement on part of the government, the Oil and Gas Regulatory Authority (OGRA) was equally responsible for this situation, sources said, adding that OGRA had been acting not like a regulator but as a government department instead.

Since the last meeting on September 16, 2022, OGRA has not held any meeting to engage the oil sector to work out a plan for taking the ToR process forward.

Replacement of Miftah with Dar also failed to wake OGRA up from its slumber. Thus, there has been no progress on ToRs that should have been finalised by now to deregulate the prices of petroleum by November 1, 2022 as was committed, sources said.

On August 2, 2022, a high level meeting had decided to formulate ToRs for the deregulation of diesel and petrol. The decision was followed by OGRA’s meeting with the oil marketing companies (OMCs) and refineries to take their input for finalising the

ToRs. Sources said that for the last three weeks, OGRA has not approached the stakeholders.

As per the oil sector, the major objective of the deregulation was to enhance competition in the industry, thus bringing the benefit of a competitive price to the final consumer. Deregulation eliminates the control of the government from a sector or a particular industry by allowing the sector to do free trade in a marketplace.

Deregulation takes place when the government is interested that there will be more and more competition in a particular industry.

As for an oil-dependent economy like Pakistan, the controlled oil prices of the state have both long-term and short-term consequences.

In the current international oil pricing scenario, Pakistan being an energy deficit economy, the best way was to deregulate the oil prices, the oil industry noted.