Oil industry suffers Rs11bn loss as government slashes HSD price
MG News | July 17, 2023 at 05:57 PM GMT+05:00
July 14, 2023 (MLN): The government reducing the price of High-Speed Diesel by Rs7 has put severe pressure on the crippling oil industry, and has caused an inventory loss of Rs11 billion for the oil industry, Oil Companies Advisory council (OCAC) issued a notice to Oil and Gas Regulatory Authority (OGRA) today.
They stated that this is not sustainable and will severely impact the already crippled Oil Industry.
“You are well aware that the Industry is facing a severe financial crunch due to insufficient margins, increased markup, high global prices, depreciation of Rupee etc. and will not be able to manage uninterrupted fuel supplies if this manipulation in pricing is not rectified through immediate price revision,” it reads.
Despite the fact that the price was increasing based on formula approved by GoP vide ECC's decision no ECC-307/34/2020 dated July 28, 2020, the price was slashed.
OCAC highlighted that instead of passing on the increase or absorbing the impact of this increase by reducing Petroleum Levy, the price was unilaterally and unjustly reduced by applying inaccurate Premium.
As per GoP approved mechanism, in case of no import by PSO during a particular fortnight, Premium and other incidentals for previous fortnight have to be applied; GoP implemented this policy to ensure that the Industry gets accurate recovery for inventory which has been acquired on the rates prevailing in the previous fortnight.
Since PSO did not import any HSD during first fortnight of July 2023, previous Premium i.e. USD 11.50 per BBL should have been used in price computation for second fortnight, however, OGRA used Premium of USD 4.20 per BBL; this arbitrary revision of Premium is against the essence of above mentioned ECC decision.
It is also pertinent to mention that apart from Premium, other incidentals included in price were from previous period i.e. second fortnight June 2023; this clearly shows that the Premium applied is anomalous. Impact of this anomaly is computed as under
| Description | Unit | Value |
|---|---|---|
| Applicable Premium - Import during 2 FN Jun 2023 | USD / BBL | 11.5 |
| Premium applied in Pricing | USD / BBL | 4.2 |
| Shortfall in Premium | USD / BBL | -7.3 |
| Exchange Rate used for Pricing | PKR / USD | 278.5 |
| Shortfall in Premium in Pak Rupee | PKR / BBL | -2033.05 |
| Conversion Factor - BBL to L | L / BBL | 158.98 |
| Impact on Price | PKR / L | -12.79 |
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