OMCs’, dealers’ profit/margin capped at July 1 level


The government has capped profitmargin of oil marketing companies (OMCs) and dealers on oil sale at July 1, 2008 level, and constituted a committee to work out some methodology to give relief to the consumers. Acting Secretary, Petroleum, G A Sabri, announced government decision of capping OMCs’ and dealers’ profitmargin here at a press conference.
He said that OMCs and dealers’ profitmargin capping would give a benefit of Rs 7.5 billion to the consumers, per annum, in oil prices. The committee, constituted by Prime Minister Yusuf Raza Gilani, will be headed by National Reconstruction Bureau (NRB) Chairman Dr Asim Hussain, and Secretary Finance Furrukh Qayyum, Secretary Planning Suhail Safdar, Federal Board of Revenue (FBR) chairman Abdullah Yusuf, and Acting Secretary Petroleum G A Sabri will be its members.
The committee will also overlook the proposed oil pricing system to make it a tool to provide a win-win situation to all oil sector stakeholders. Existing oil pricing system has a serious flaw as it is based on a proportionate increase in profitmargin to OMCs and dealers and retailers. However, it is totally silent as far as consumers’ protection is concerned. For this flaw, it is being criticised by consumers at every forum.
Sabri said the government had also reached an agreement with refineries, which provides that the latter, as key player of the oil sector, would go for expansion in their production capacity to help the country meet its growing energy demand.
He said the committee would decide the issue of deemed duty–a protection given to the refineries under exiting oil pricing formula. He said the government has been paying Rs 30 billion subsidy to protect the consumers from additional financial burden. He said Rs 13 billion sales tax collection on petroleum products sale reduces per month subsidy to Rs 17 billion.
He gave a break-up of subsidy which indicated that the government, as on July 22, was paying Rs 33.93 subsidy on kerosene, diesel Rs 35.42, LDO Rs 29.40, whereas there was no subsidy on petrol. Sabri said since May 2004, the government had revised oil prices 13 times against 87 times. He said the policy of capping oil prices cost the government Rs 220 billion last year only. He said that timely passing on of the actual prices to the consumers could have averted problems confronted by the government and people.

Copyright Business Recorder, 2008