ISLAMABAD: In response to escalating fuel prices and the oil industry’s grievances regarding the surge in smuggled oil products, the government has accelerated the process of deregulating petroleum prices, aiming to shift public scrutiny onto oil marketing companies (OMCs).
Deregulating the IFEM mechanism would lead to significant price disparities between cities and oil companies, ranging from Rs3 to Rs8 per liter, based on transportation costs. Consumers near ports and refineries would benefit from lower prices, while those farther away would face higher costs.
The petroleum division has issued a directive to the Oil and Gas Regulatory Authority (OGRA), requesting a presentation within three days on the analysis and implications of petroleum product deregulation, specifically focusing on in-country freight equalization margins (IFEM) and related factors.
According to an official quoted in Dawn, the finalized deregulation framework will require approval from the federal cabinet and the Special Investment Facilitation Council (SIFC). Deregulating petrol and high-speed diesel (HSD) pricing would abolish uniform pricing nationwide, allowing oil companies to independently set prices for different cities and towns.
Legally, petroleum prices are already deregulated, with the government solely notifying kerosene prices for retail. For other products like petrol, HSD, and light diesel oil, the government notifies tax rates and fixed profit margins, while OGRA and the Ministry of Finance adjust IFEM to maintain uniform pricing.
Under the new framework, petrol and diesel prices, along with OMC and dealer commissions, are likely to be completely deregulated, following the model of high-octane blending component (HOBC).
Ogra and the Competition Commission of Pakistan would assume greater roles in ensuring product quality, availability, and competitive market conditions, despite limitations in capacity and outreach, to prevent collusion and cartelization.
