The Judicial Commission, established by the Supreme Court of Pakistan, to look into the oil pricing mechanism, submitted its findings to the court and made short-, medium- and long-term recommendations that an expert body be put in place for oil policy-making and price fixation, from time to time.
The Supreme Court had set up the commission on March 30 under Justice Rana Bhagwandas to probe into the pricing mechanism of petroleum products, since 2001. The commission had submitted a 9-point interim report on May 12, containing some startling features.
Afterwards, on June 22, the commission requested the court for some extra time to complete the exercise, at which the court had extended time till June 30. The Commission has suggested to the government to consider following measures for immediate implementation.
SHORT TERM: Forming a Committee of oil and energy experts, framing terms of Reference for the Committee for the medium and long-term roadmap for an Integrated Energy Policy. Controlled deregulation of IFEM (Freight Pool) by replacing it with the primary transportation charges to be built in the ex-depot prices as spelt out in the report.
As a first step, the deregulation be carried out under a controlled regime and in the next phase the Primary Transportation Charges should be built in the OMCs margin. Fixing rate in absolute Rupee terms per litre (as against percentage term) for the following components of selling prices.
a. GST
b. OMCs' margin (as has been fixed recently for HSD
c. Dealer's Margin
Once the ad valorem calculation of the above components is changed to absolute Rupee rate per litre, the end selling price of the product will truly reflect the impact of increasing/declining trend of oil prices in the international market. This should redress the vital grievance of people with regard to fabulous profits made by the Government, OMCs and Dealers with the increase in the oil price in the international market and not passing on benefit of reduced oil price to them.
DEREGULATION OF THE FOLLOWING PRODUCTS:
a. HOBC
b. LDO
c. JP-1
Capacity Building of Ogra and the Ministry of Petroleum and Natural Resources as suggested in the Report. Withdrawal of permission for setting off operational losses by refineries against Special Reserves and allowing them, instead, to issue bonus shares to the extent of capital expenditure on specific projects.
Parco should also be required to create Special Reserve. Parco's position should be revisited with regard to the special status being enjoyed by it and steps taken to bring Parco in line with other refineries, especially with regard to determining ex-refinery prices on a uniform basis.
MEDIUM TERM: Committee of oil experts and economists to examine and develop an appropriate formula for determining ex-refinery prices. Develop a programme and roadmap for phasing out deregulation of all petroleum products including OMCs and dealers' margin.
Arm effective system to be developed and put in place for monitoring and facilitating the programme of modernisation & upgrading of refineries by Ogra, especially with regard to desulphurisation and isomerisation.
LONG TERM: Permanent institution be established, manned by energy experts, to carry out research and develop a vision for an Integrated Energy Plan and submit reports to the government for its future policies, etc.