Proposed deregulation of oil prices may not be bound to ensure investment from local refineries. OMCs have raised some questions which need to be resolved/answered before the implementation of deregulated oil prices plan, an official source told educationneverdies earlier this week.
Deregulation is the elimination of the control of the government from a sector or industry and allowing them to do a free trade in an efficient marketplace. The major aim behind deregulation is to enhance competition in the industry, thus bringing the benefit of competitive price to the final consumer.
The rationale of deregulation of prices will enable each OMC to absorb their cost/losses, which are incurred in terms of Forex exposure, incidentals, demurrage cost, storage cost, and any other cost.
However, the OMCs expressed several concerns about the deregulation of oil prices and raised several questions, which include:
- OMCs’ Margin to be deregulated and to be managed by each OMC which may vary from OMC to OMC and dealer margin may vary after June 30, 2022, which may be decided by the OMC
- How will OMCs ensure the product specs pricing while there are two prevailing specs as per the Government of Pakistan (GOP)? Local Refineries Produce Euro-II or less while imported product is Euro-V
- Pricing of POL products may change at the discretion of each OMC
- Taxes should be in absolute Rupees and not in percentages to simplify the reconciliation of taxes collected
- In a deregulation scenario, OMCs based on their sales and demand pattern may or may not keep all storage wet
- In case of Deregulation Refinery upliftment, requirements would no longer exist and OMCs may not be bound to procure products locally
- OMCs, based on their product movement plan may not be under obligation to use WOP Multi-grade