The Economic Coordination Committee (ECC) of the cabinet has scheduled a meeting this week to discuss the issue of increasing the profit margins of oil marketing companies and dealers through prices of petroleum products.
According to a senior official, the oil industry has been persuading and pressurizing the government to consider increasing the profit margins of petrol and High Speed Diesel (HSD) in accordance with the inflation rate.
Prime Minister Shahid Khaqan Abbasi made a vow on Aug 1. He told that the decision on updated rates was due since July 1st and now the dealers and oil marketing companies (OMCs) are demanding an increase of 0.4 paisa per litre because of the delay.
Two Options to Solve The Problem
A senior government official told that regardless of disapproval from the Planning Commission and the Oil and Gas Regulatory Authority (OGRA), the Ministry of Petroleum lead by Mr. Abbasi had moved a summary to ECC in June for deregulation of HSD’s price. The ministry has suggested two options on HSD.
They demand either an increase in the margin of dealers and OMCs on HSD by 16 paisa and 14 paisa per litre respectively, or deregulation of diesel price by the government.
The Planning Commission and OGRA debated that the unwisely decision of deregulation of diesel price was made in 2000 and billions of rupees were misused in the name of additional profit.
The petroleum ministry said that under the decision of ECC, margins on petrol and HSD are being updated every year on the basis of CPI since 2014. Using the same principle, the margin of OMC on petrol should be increased from Rs 2.14 to Rs 2.55 per litre and Rs 3.16 to Rs 3.35 per litre for dealers.
Should be Deregulated
In case of HSD, the petroleum ministry suggested that
instead of revising (margins for dealers and OMCs) on the CPI basis, it should be deregulated under the government’s policy of liberalization and deregulation in a phased manner to encourage and support investment, which may lead to an increase in the oil storage capacity in the country by enhancing days cover
The Planning Commission suggested that the formulation of “a clear-cut downstream oil policy” is imperative. The policy should cover all aspects of refinery, petroleum product logistics, storages, marketing and distribution.
The Commission supported the idea of increase in margins on diesel and petrol on basis of CPI, but insisted that the deregulation of HSD should be considered after formulating the policy.