The Petroleum Ministry is working out a mechanism to automatically adjust the margin loss of new entrants in Oil Marketing Companies (OMCs) on price of High Speed Diesel (HSD) and sought recommendations from OMCs in this regard. At present, all OMCs follow the weighted average price of HSD announced by Pakistan State Oil (PSO) and new OMCs approached the government to develop a mechanism to automatically adjust their losses on HSD price.
At present, there is a fixed OMC margin of Rs 1.35 per litre and Rs 1.50 per litre dealer's margin on the sale of HSD. New entrants maintain that HSD price announced by PSO is not competitive and results in reduction in their margins. During the current month, the new entrants claimed they suffered 73 paisa per litre loss on HSD price as a consequence.
Earlier, the Petroleum Ministry had turned down the demand of the new entrants in OMCs to fix separate price of HSD to protect them against margin loss. The Finance Ministry had opposed the proposal fearing that the government would face loss in revenue after introducing separate price of HSD for new OMCs. After taking over the charge of Petroleum Minister, Syed Naveed Qamar has begun an investigation into the issue, sources said.
New OMCs recommend a lower HSD price compared to PSO benchmark price that would reduce the government earnings through General Sales Tax (GST) and Petroleum Levy on HSD. Sources were of the view that the government was not in a position to bear this revenue loss at this stage when the country is facing an acute financial crunch and, therefore, the demand of the new OMCs for separate price of HSD is likely to be turned down again.
At present, price of high speed diesel (HSD) is de-regulated based on the federal government formula whereas the price 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. However, all the OMCs follow the notified price of HSD by PSO.
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