The federal government has reportedly decided to deregulate petrol pricing and marketing and abolish the uniform pricing mechanism following the countrywide petroleum shortage.
According to several reports, Oil Marketing Companies (OMCs) in the country did not reduce petroleum prices in line with the international decline in petrol prices even though the government had notified a significant reduction in petroleum prices accordingly. Instead, OMCs have either been charging exorbitant prices for petroleum products or been raising hue and cry by creating an artificial shortage to maximize profit.
Last week, the Oil and Gas Regulatory Authority (OGRA) had warned OMCs of action and to refer the matter to the Competition Commission of Pakistan (CCP) for illicit and anti-competitive practices.
In addition to the deregulation of petrol pricing, the government has reportedly decided to link the petroleum prices to Platt’s Oilgram’s average of the last month. Currently, oil prices are determined each month on the basis of the actual import cost of Pakistan State Oil (PSO).
Even after the deregulation, the frequency of petroleum product pricing will remain unchanged as the Economic Coordination Committee (ECC) of the cabinet had rejected to shift it to a fortnightly basis.
Lastly, the government has also decided to deregulate the Inland Freight Equalization Margin (IFEM) mechanism that helps to keep the prices even all over Pakistan.
What this means is petroleum prices will now vary from city to city and company to company based on their distance from ports and oil refineries. The difference could vary between Rs. 1 and Rs. 5 per liter depending on the actual transportation cost.