The government is going to introduce higher grade High Speed Diesel (HSD) under oil marketing companies and dealer margins.
This is expected to improve the efficiency of diesel-only vehicles on Pakistani roads.
Currently most of the HSD used in Pakistan is low quality while other countries have moved on to Euro 3, 4 and 5.
Following Up on Petroleum
Last year the government successfully introduced Research Octane Number (RON) 92 petroleum, which replaced the low quality RON 87 fuel.
The only other country that uses RON 87 fuel is Somalia.
According to sources in the government, the Ministry of Petroleum and Natural Resources has drafted a summary which will be presented to the Economic Coordination Committee (ECC) for approval. The summary has been shared with the concerned ministries and the Oil and Gas Regulatory Authority (OGRA). They will add their comments and suggestions to the summary before it is sent to the ECC.
The Ministry of Petroleum is also considering deregulation of margins on oil marketing companies (OMC) before introducing better quality diesel oil.
OGRA is of the opinion that the margins are determined by the government for now. Letting the oil companies determine the margins would leave the top 6 OMCs (with a market share of 87.9%) creating a cartel due to lack of fuel choice and competition.
They would create a monopoly situation with consumers at their mercy, according to OGRA.
Ministry of Petroleum argues that regulated regimes would result in margins being fixed which means that all the companies will be equally benefited. If a deregulated environment is allowed, the OMCs will need to offer good quality fuel with a reasonable price tag in order to gain market share. Good performers will lead the way while bad performers will struggle.
Market forces also discourage the formation of a cartel and selling fuel at a high price. OMCs will be forced to fall in reasonable margins.
If all goes well we can see low impurity diesel making its way to Pakistan soon which is beneficial for the environment as well as the consumers.