The government has deferred the proposal to empower the Oil and Gas Regulatory Authority (Ogra) to determine furnace oil prices; and is working to authorise Ogra to play a monitoring role to maintain checks and balance on prices in the country.
Informed sources told Business Recorder that Oil Companies Advisory Committee (OCAC) currently determines prices of furnace oil and on the government side there was no committee to monitor the furnace oil prices. The government is now working to empower Ogra to monitor the prices of furnace oil in the country.
Sources maintained that the Petroleum Ministry has prepared a summary in this regard to table it before the Economic Co-ordination Committee (ECC) of the Cabinet for formal approval. Petroleum Ministry has sought comments of the stakeholders regarding the empowerment of Ogra to play the role of monitoring body.
Earlier, Petroleum Ministry had proposed to the government to empower the Oil and Gas Regulatory Authority (Ogra) to determine furnace oil prices when the prices had shot up in the international market. The higher price of furnace oil had impacted the power purchase price that resulted not only in higher power purchase price but a huge circular debt between Water and Power Development Authority (Wapda), Independent Power Producers (IPPs) and fuel supplier Pakistan State Oil (PSO).
As furnace oil price rose in the country, the government had initially argued that importers and producers of furnace oil were involved in making huge profits and tasked Ogra to investigate the matter. Sources added that the authority had held meetings with importers of the furnace oil.
After detailed discussions with the importers of furnace oil and comparing furnace oil prices prevailing in the country with the furnace oil prices in the international market, Ogra had submitted to the government that there was no significant difference in the two prices.
They said that after investigation, the government had decided to empower Ogra to play the role of monitoring body to maintain checks and balance on the furnace oil prices. The consumption of furnace oil in Pakistan is 10 million tons and 5-6 million tons furnace oil out of total requirements is imported.
The market for furnace oil is de-regulated and the government is reluctant to interfere in the market. However, Ogra has been charged with the responsibility of protecting the interests of consumers.
The higher furnace oil prices affect the power purchase price and power distribution companies seek the power tariff hike mostly based on the hike in furnace oil prices. Whenever furnace oil prices peaked, the power purchase price jumped from Rs 10 per unit to Rs 26 per unit.
Sources said the government deferred the proposal to empower Ogra to determine the furnace oil prices due to another reason also. They said that as furnace oil prices have declined in line with the reduction in prices in the international market there is no need for allowing Ogra to determine the prices in the interest of consumers. The country witnessed the highest average furnace oil price on July 13 at $751.37 per barrel that declined to 522.4 per ton on October 31.
Some senior officials in Petroleum Ministry had also opposed empowering Ogra to determine the furnace oil prices. The furnace oil is the main item that is being used by Independent Power Producers (IPPs). There is still circular debt of billions of rupees pending between power producers and fuel suppliers that happened at the time when the furnace oil prices were at the highest level.
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