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Review of petroleum prices

During 2018 closed the Government of Pakistan has given the relief to the people and declined the petroleum prices by Rs 4.86 per litre. Statistics presently show that a fall of Rs 4.26 per litre of diesel price. Similarly, the price of kerosene oil has been also cut by Rs 0.52 per litre, whereas the light diesel oil price has been slashed by Rs 2.16 per litre. It is also recorded that the now new prices are– petrol, Rs 90.97; diesel, Rs106.68; light diesel, Rs75.28; kerosene oil, Rs 82.98. It is also said that the Government of Pakistan has notified an ‘immediate ban’ on import of furnace oil and ordered all the refineries to use billions of rupees in yearly ‘deemed duty’ they collect on petroleum products to upgrade their refining facilities. Sources also mentioned that the government also ordered immediate reduction in the furnace oil (FO) production to a minimum and enter into commercial contracts with power producers for utilization of their capacity for FO storage.

It is predicted that in future, all refineries would ensure that FO production is minimal byproduct of crude oil processing. The oil refineries should undertake production of extra storage facilities also utilization of the proceeds of deemed duty for upgradation of their facilities.

Furthermore, the government imposed ban on import of FO with immediate effect, except for the K-Electric. Lastly, in similar instances, the government, via the Economic Coordination Committee (ECC) and the cabinet, has permitted the K-Electric to run their plants on residual furnace oil (RFO) instead of gas from the SSGC and has picked up the difference of cost as subsidy under the Gas Load Management Plan (GLMP). In light of the present condition, different sources mentioned that ECC and cabinet have been requested that decision for diversion of gas to other sectors should be reviewed and stated to sustain the allocated priority of gas to the energy sector. It has been requested, that in case gas was required to be diverted, running cost of equivalent MW of generation of RFO be subsidized as well.

The experts also showed that the initiative taken to cut the import bill by banning fuel oil import would also impact the fragile energy sector of Pakistan. Statistics also showed that in the country, 54 percent of total power generation consists on oil or gas, while of these, 26 percent operate on Re-liquefied Natural Gas (RLNG). It is also posted that no RFO generation had been envisaged for the months of November 2018 to March 2019.

 

However, to sustain strategic reserve at RFO-based power plants, and to handle the high inventory of furnace oil at refineries, RFO and Low Sulphar Furnace Oil (LSFO) supplies were requested at Muzaffargarh, Jamshoro, HUBCO, KAPCO, at a steady rate. Sources said the RFO consumption which started from 4,200 MT/day to about 18,000 MT/day till January 1, 2019, has adversely impacted the stock strategic building exercise for plants running during the high demand months.

On the other hand, the country’s oil import bill increased by 17.63 percent during first 5-months (July to November) of the ongoing fiscal year, putting pressure on the overall imports of the country.

The Government of Pakistan imported petroleum products value $6.5 billion during July to November period of FY2019 as against $5.6 billion of the same period of the last year. In absolute term, the import of oil products were increased by $900 million in one year. The rise in oil imports had pushed the overall imports of Pakistan to $23.6 billion in just 5-month of the current fiscal year 2019. The rise in imports bill is resulting in widening of current account deficit, which is one of major issues for the present government.

The Pakistan Bureau of Statistics (PBS) data also revealed that the petroleum group imports saw a robust growth of 20.86 percent standing $1.36 billion in November as compared to $1.12 billion over the same month previous year, with largest surge coming from natural gas liquefied, which increased by 58 percent in the month of November over the same period of last year.

Meanwhile, during the first five months of the ongoing fiscal year, bill for petroleum products imports had gone up by 17.63 percent. In petroleum products, the government of Pakistan had imported petroleum products value $2.9 billion and invested $2.1 billion on petroleum crude.

Similarly, Pakistan had imported liquefied natural gas (LNG) worth $1.5 billion and liquefied petroleum gas (LPG) worth $86 million. Barring petroleum products, almost all of the groups in imports table posted negative growth. According to the PBS statistics, Pakistan’s machinery imports had gone down by 17.9 percent. The government had invested $3.7 billion on importing machinery during first five months of the current financial year as compared to $4.5 billion of the same period of the previous year.

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