The government has decided to re-open four oil storage depots of Pakistan State Oil (PSO) in Punjab which were abandoned subsequent to a decision taken by the Economic Co-ordination Committee (ECC) of the Cabinet in July 2008, documents available with this correspondent show. The objective was to reduce Rs 0.20 per litre Inland Freight Equalisation margin (IFEM).
The re-opening of four abandoned storage depots, including Multan, will increase prices of HSD by Rs 0.11 per litre and MS by Rs 0.07 per litre. In the past two years, a very high increase in the demand of motor spirit (MS) has been witnessed. The consumption of motor gasoline (petrol) has soared from 1.43 million tons in 2006-07 to more than 2.4 million tons in 2010-11.
Documents further show that the country's current demand of petrol is about 7000 tons per day, out of which local refineries produce about 4000 tons and balance requirement is met through imports. Punjab's share is about 3000 tons per day, Khyber Pakhtunkhawa's (KP) share is 500 tons per day, and its demand is mainly met by Attock Refinery (ARL), located at Rawalpindi, and Parco mid-country refinery located near Muzafargarh with total production capacity of 3300 tons per day.
According to the Ministry of Petroleum and Natural Resources, it is imperative that to avoid any recurrence of the shortage, especially in Punjab/north, storage needs to be enhanced. Recently, a technical fault in ARL led to an acute shortage of petrol in central Punjab and created a crisis-like situation. One reason was lack of storage facilities of petroleum products in the region.
"Petroleum Ministry has proposed that Faqirabad, Kotla Jam, Sahiwal, and Shershah abandoned depots of PSO may be re-opened under the IFEM. Other OMCs will also be allowed IFEM from these locations as and when they open their storages at these locations," the documents show.
The petroleum products storage at these depots has strategic importance and inclusion in the IFEM mechanism would bring relief to the consumers of upcountry and help avoid recurrence of product shortage. All OMCs are required to construct minimum 20 days' storage capacity of each product of their proposed sales and maintain the requisite stocks to meet any emergent need of the country.
The Ministry says that it would be the responsibility of OMCs to construct storages and maintain minimum 20 days' stocks at each petroleum product at all locations/depots (ie 12+4), or as directed by the GoP from time to time. The Petroleum Ministry's proposal was circulated in the Planning and Development Division, Finance Division, Ogra, FBR and Ministry of Defence. Finance Division had asked to include cost implications for re-opening of proposed four depots and also to indicate the implications on the price of petrol as a result of the proposed re-opening of the depots. As per details provided by Ogra, after inclusion of four depots net increase would be Rs 0.11 per litre on HSD and Rs 0.07 per litre on MS.
Ogra has supported the proposal and suggested holding OMCs responsible for maintaining 20 days' stocks of each product at all locations. Oil storage depots were abandoned on the recommendations of a special committee comprising the then Chairman of NRB (Chairman of the committee), Chairman FBR, Secretary Finance, Secretary Planning and Development Division and Acting Secretary Petroleum.
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