FUEL SHORTAGE CAUSING HARDSHIPS

KANWAL SALEEM
(feedback@pgeconomist.com)
Sep 27 - Oct 3, 20
10

In the presence of already depressed economic situation in the country, shortage of petroleum products is not only causing hardships for the motorists but also slowing down business and trade activities.

The present situation is attributed to floods in the country, as the country's refinery production has declined by 28 per cent in August 2010 as compared to previous month of July mainly due to production stoppage at Parco after floods devastated the transportation network in the surrounding region.

According to statistics, the refinery production in the first two months of fiscal year 2010-11 witnessed a decline of 18 per cent as compared to the same period of previous fiscal year. The figures show that total refined oil production in the two months of fiscal year 2010-11stood at 1.2 million tons compared to 1.4 million tons in the corresponding period last year.

According to experts, the decline is mainly the outcome of production closure at Parco, the largest mid-country refinery, after floods devastated the transportation network in the surrounding region, forcing the refinery to cut down its supplies.

Parco witnessed its market share falling drastically to 29 per cent in the two months of fiscal year 2010-11 from 42 per cent after production closure in August 2010. PRL and Byco also witnessed their shares deteriorating to 20 per cent (from 21 per cent) and three per cent (from 8 per cent) respectively during this period. On the other hand, NRL remained the key gainer witnessing its market share surging to 24 per cent (from 13 per cent) in the two months of fiscal year 2010-11.

On the other hand, oil refineries are pressing the government to link price of locally produced motor gasoline with actual import parity price to secure them from losses in kind of price difference.

Industry sources claimed that oil refineries were facing loss of Rs3 to Rs4 per litre in motor gasoline price. The price must be linked with actual import parity price at which Pakistan State Oil (PSO) and Shell are importing motor gasoline, they said, adding: "Oil refineries were facing many critical issues. The Federal Board of Revenue (FBR) had imposed one per cent minimum turnover tax, which would further aggravate the financial position of oil refineries. Oil refineries are currently operating at negative margins and we are waiting for review in oil pricing mechanism to save them from default."

According to the sources, the more critical issue is circular debt that is creating problems in import of crude oil, which needs to be addressed on urgent basis.

According to Aftab Hussain, General Manager Supply and Planning, Pakistan Refinery Limited (PRL), "We had streamlined imports of crude oil for the months of October-November and onwards to meet the country requirements." "PRL is currently operating at maximum production capacity of 80 per cent to meet country's requirements," he said adding that they had increased production despite financial crunch due to circular debt issue. He further said that PRL had not received any amount so far pending under circular debt

Moreover, Pakistan's 100,000 barrel-per-day (bpd) joint venture Pak Arab Refinery Ltd (Parco), which was shut by severe floods, is on track to restart later this week.

According to sources, the repairs to the refinery due to the flooding are more or less completed, and it is all set to resume operations.

It may be noted that Parco was shut for two weeks because of the floods. Due to the closure of the refinery, PSO has bought two jet fuel cargoes totaling 35,000 tonnes, and up to three parcels of gasoline totaling 105,000 tonnes for September delivery. PSO is also seeking two 16,500-tonne lots of jet fuel per month for October and November via tender, with an option for a third cargo in November.

The Pak Arab Refinery has already accused PSO of importing high speed diesel (HSD) in spite of available stocks in the country.

According to figures released by the Oil Companies Advisory Committee (OCAC), in 2008-09 total oil consumption was 7.94 million tons and total refinery output was recorded at 3.1 million tons. The country had to rely on 4.84 million tons imported petroleum products. In year 2007-08, total consumption of petroleum products was 7.45 million tons and total refinery production stood at 3.315 million tons. The imports contributed 4.14 million tons to meet the country's requirements.

Further, majority of the petrol pumps in different parts of the province including Lahore have shut down their operations after the interruption in fuel supply prompted by the blockage of roads in flood-affected areas, which not only caused acute shortage of fuel but also caused massive nuisance for the commuters.

The serious shortage of fuel has paralysed the routine activities of citizens as well as marred the business bustle, causing loss of millions of rupees daily to the business community.

Some motorists complained that a fairly large number of filling stations had suspended the supply of petrol while the others had been selling the fuel at much higher rates i.e. Rs100-150 per litre petrol. They said that the owners of the filling stations had taken plea that they had limited supply of petrol so they would overcharge till the regular supply of petrol from the fuel supplying companies.

On the other hand, the shortage of the liquefied petroleum gas (LPG), coupled with a sharp rise in its prices has made the two-stroke rickshaw drivers increase their fares.

"The prices have almost doubled in one month. It is not possible to meet ends by charging fares as before," Iqbal, a two-stroke rickshaw driver, said.

He said that LPG has even left behind the petrol, which once used to be the most expensive fuel.

Irfan Khokhar, the LPG Distributors Association chairman, said that last week the LPG price was raised for the fifth time in August and was fixed at Rs110-Rs115 per kg. He said that though the Oil and Gas Regulatory Authority (Ogra) intervened and brought it down to Rs83 per kg, the producers were still selling it at higher rates. He said that the distributors had no option but to sell LPG at higher rates. "The high rates have led to a decline in our sales and profits," Khokhar said.

He alleged that the LPG-mafia had extracted around Rs22 million from public in Ramazan alone by increasing prices.