Pakistan govt moves toward phased deregulation of fuel prices

ISLAMABAD – The federal government is considering gradual deregulation of petroleum prices to avoid the political pressure associated with pricing of fuel products.

With new strategy, Shehbaz Sharif led government will transfer authority to set petroleum prices from state control to oil marketing companies. Petroleum Minister Musadik Malik to schedule an important meeting to chalk out matters.

The Chairman of the Oil and Gas Regulatory Authority (OGRA) has been given task of evaluating the impact of deregulation on petroleum prices and creating a strategic framework. This final deregulation framework will be presented to the prime minister for approval.

Insiders claimed that petroleum dealers are against transferring pricing authority to oil marketing companies, fearing potential profiteering.

In previous meetings, Oil Marketing Association of Pakistan (OMAP) urged government to quickly address foreign exchange losses in the petroleum industry.

Oil and Gas Regulatory Authority (Ogra) will be strengthened to ensure competitive conditions and prevent monopolistic behavior. For the unversed, a previous attempt to deregulate the inland freight equalisation margin (IFEM) was reversed in 2010.

Deregulation would allow Oil Marketing Companies to choose supply sources and abandon the current requirement to prioritize local refinery products. Both refineries and OMCs must adhere to storage and stock requirements and digitize the supply chain for transparency. Independent retail outlets should be introduced to foster competition.

Refineries will continue using the current import parity price principles but will include a 10% customs duty for petrol and high-speed diesel in the import parity price.