Govt weighs activating fuel saving plans

AI Summary

The Pakistani government is considering fuel conservation measures amid rising oil prices due to Middle Eastern tensions. Fuel prices for petrol and diesel will now be announced only on working days, improving transparency while retaining government control over levies and duties.

• Move aimed at preserving at least three months of import cover • Petrol, diesel prices to be revised only on working days • Ogra to now publish working details on its website • Govt to retain control over levy, climate levy, customs duty, deemed duty, margins ISLAMABAD: The government may shift back to fuel conservation and austerity measures as early as this week or next, as renewed hostilities in the Middle East raise pressure on oil prices and foreign exchange reserves. At the same time, prices of the two major petroleum products — petrol and high-speed diesel — will be revised only on working days, even though the move has been portrayed as a step towards deregulation and daily pricing. Retail petroleum prices will be announced every working day, from Monday to Friday, and not on Saturdays and Sundays. The announcement will be made by the Petroleum Division late in the evening, as usual, but not on a weekly basis. Effectively, rates announced on Friday will remain in place for the next three days — Saturday, Sunday and Monday — a senior government official told Dawn. He said price revisions could decline to four days a week when the government finally shifts to fuel conservation and austerity measures, possibly this week or next, depending on the regional situation and formal cabinet approval. He said Prime Minister Shehbaz Sharif had already discussed fuel conservation measures over the past week and the matter may be taken up again this week by the federal cabinet for a formal decision. The official said a lot of debate had followed last week’s controversial announcement about the revision in pricing, but no change had been made in the product pricing mechanism except the frequency of price revisions from weekly to daily. “Ogra will continue to calculate price changes and send the working paper to the Petroleum Division, which will issue a notification and press note,” he said. He added that Ogra had already been calculating prices on a daily basis as a routine even when fortnightly or weekly adjustments were made in retail rates. The weekly rates quoted daily by the oil price agency S&P Global Energy Platts will continue to be taken into account for daily adjustments as in the past, but now on a rolling basis. This means that the rate quoted in Platts on the first day, for example Monday, of the previous week will exit the pricing sheet on Monday for local price notification and will be replaced by the rate quoted on the previous Tuesday. In fact, for the first price change announced last Friday and effective for July 17-20, the import price was taken into account for nine days, from July 9 to July 17, instead of the usual five days used for previous weekly price adjustments. Another minor change is that Ogra will now post these working details on its website, the official said. He recalled that the regulator used to make even the smallest price build-up factor available on its website, along with an archive of all changes, until about 15 years ago. That practice ended after the government reclaimed political control over fuel pricing and raised the decision to the level of the prime minister. “There is no price deregulation as yet,” the official said. He said the government would continue to determine fuel requirements, set rates for petroleum levy, climate levy, customs duty and deemed duty, approve margins for oil companies and dealers, partially regulate cargo movement and change the freight equalisation margin. “We have not given up any of these roles or devolved these powers to the oil industry,” he said, adding that global prices, import premiums and insurance remained outside Pakistan’s control in any case. At present, taxes and margins imposed by the government stand at around Rs110 per litre on petrol and Rs96 per litre on diesel. Any change in fixed charges will continue to be made by the government. Deregulation may be the next step, but not at this stage. In that case, the government or its regulators could only set product specifications and mandatory stocks, while oil companies could be free to source their products and compete for market share through pricing incentives and service quality. However, such a move could also create challenges for local refineries, petroleum dealers and consumers, particularly in rural areas. In such a situation, ongoing investigations and cases against some marketing companies for importing quantities of their choice and keeping them in warehouses outside Pakistan Customs jurisdiction — considered illegal at present — may become infructuous and treated as a legal business practice. The petroleum minister is already engaging with investors from friendly countries to set up oil warehouses along Pakistan’s ports and coastal areas. Talking about fuel conservation, officials said the final way forward would depend on political discussions and technical input, particularly from the Ministry of Finance and the State Bank of Pakistan. However, they said a