Monday, 08 June 2009 10:13
ISLAMABAD: The government is considering a proposal to circumvent any role of the government in fixing oil prices and, instead, to authorise the oil marketing companies (OMCs) to make automatic adjustment in oil prices in line with the global oil prices from the next fiscal year 2009-10. However, OMCs will follow the formula of oil pricing set by federal government.
At present, high speed diesel (HSD) price is de-regulated, based on a federal government formula, whereas the prices of other products, including light diesel oil (LDO), kerosene oil, motor spirit, JP-1, JP-4 and JP-8, are regulated and notified by the government at the end of every month.
Sources told Business Recorder that a meeting was held recently in Finance Ministry to consider the proposal. The meeting reviewed the current situation of oil price mechanism and considered a proposal to exclude the role of government, and authorise OMCs to automatically adjust oil prices in line with the global oil prices. This proposal was made in the aftermath of government decision to withdraw the subsidy on oil and products in the forthcoming budget.
Oil prices in the international market are on the rise and there is a possibility that petroleum development levy (PDL) on petroleum products, as is currently being levied, will automatically end after the global oil price exceeds $70 per barrel crude oil price.
The government continues to face the problem of circular debt and a major reason for this is the pending payment of price differential claims (PDC) to OMCs. State run Pakistan State Oil (PSO) is still facing the problem of circular debt and is in a critical condition in terms of running its operation of supplying oil to the power sector.
PSO's dues against different companies are piling up. PSO is to recover Rs 3 billion from Wapda, Rs 31 billion from Hubco, Rs 19 billion from Kapco, Rs 3.2 billion from PIA and Rs 5 billion PDCs from government. PSO is to pay Rs 28 billion to Parco, Rs 9.1 billion to PRL, Rs 7.6 billion to NRL, and Rs 3.7 billion to Bosicor oil refinery.
The government had announced 2.5 percent reduction in price of petrol, high speed diesel (HSD) and HOBC following the orders of Supreme Court, effective from May 22. Despite cut in POL prices, the government is still charging PDL of Rs 12.28 per litre on petrol, Rs 16.44 per litre on HOBC, Rs 6.88 per litre on kerosene oil, 3.95 per litre on light diesel oil, Rs 3 per litre on JP-4 and JP-8.
At present, high speed diesel (HSD) price is de-regulated, based on a federal government formula, whereas the prices of other products, including light diesel oil (LDO), kerosene oil, motor spirit, JP-1, JP-4 and JP-8, are regulated and notified by the government at the end of every month.
Sources told Business Recorder that a meeting was held recently in Finance Ministry to consider the proposal. The meeting reviewed the current situation of oil price mechanism and considered a proposal to exclude the role of government, and authorise OMCs to automatically adjust oil prices in line with the global oil prices. This proposal was made in the aftermath of government decision to withdraw the subsidy on oil and products in the forthcoming budget.
Oil prices in the international market are on the rise and there is a possibility that petroleum development levy (PDL) on petroleum products, as is currently being levied, will automatically end after the global oil price exceeds $70 per barrel crude oil price.
The government continues to face the problem of circular debt and a major reason for this is the pending payment of price differential claims (PDC) to OMCs. State run Pakistan State Oil (PSO) is still facing the problem of circular debt and is in a critical condition in terms of running its operation of supplying oil to the power sector.
PSO's dues against different companies are piling up. PSO is to recover Rs 3 billion from Wapda, Rs 31 billion from Hubco, Rs 19 billion from Kapco, Rs 3.2 billion from PIA and Rs 5 billion PDCs from government. PSO is to pay Rs 28 billion to Parco, Rs 9.1 billion to PRL, Rs 7.6 billion to NRL, and Rs 3.7 billion to Bosicor oil refinery.
The government had announced 2.5 percent reduction in price of petrol, high speed diesel (HSD) and HOBC following the orders of Supreme Court, effective from May 22. Despite cut in POL prices, the government is still charging PDL of Rs 12.28 per litre on petrol, Rs 16.44 per litre on HOBC, Rs 6.88 per litre on kerosene oil, 3.95 per litre on light diesel oil, Rs 3 per litre on JP-4 and JP-8.
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