Benefit is not passed on to the grass root level
By AMANULLAH BASHAR
Oct 22 - 28, 2001
Oil marketing companies in Pakistan have cut oil
prices ranging from 5.5 per cent to 11.5 per cent as the rupee
strengthened against the dollar and international prices decreased
The newly revised prices for High Speed Diesel
indicate a decline of almost Rs2 per liter as in high-speed and Light
Diesel Oil prices. The High Speed Diesel that is the main fuel for
transport has come down from Rs19.19 per liter to Rs17.33 per liter
while Light Diesel Oil from Rs16.23 to Rs14.48 per liter.
This is certainly a major cut in diesel prices
especially for the bulk consumers. It is unfortunate that while the
government honouring its commitment to revise oil prices in accordance
with the International prices, its real benefit is not being passed on
to the grass root level.
During last one and half year, all type of transport
charges has been multiplied on the pretext of increase in oil prices.
The minimum fare for buses has been jumped from Rs2 to Rs5, for mini
buses from Rs3 to Rs5 while taxi fares were allowed to a quantum jump
from Rs5 to Rs7.50 per kilometer. That increase was allowed out of
proportion and was not matching to the increase in oil prices.
The middlemen that's transporters, airliners and
other industrial sectors consuming oil for their production is pocketing
the cut in oil prices. They don't have moral courage to reduce prices on
their own. They are getting double advantage of the situation by getting
increased prices of their products or services on the excuse of increase
in oil prices and the current cut in prices announced by the oil
companies. It is the time for the price regulatory bodies to come
forward in the interest of the masses and make it sure that the prices
are reduced in accordance with the new price level. Otherwise, the cut
in oil prices announced by the oil companies will be fruitless for the
people at the grass root level.
Tariq Kirmani, Managing Director of Pakistan State
Oil (PSO) and Chairman, Oil Companies Advisory Committee (OCAC) while
announcing the decline in oil prices said that during the last
adjustment several consumers were not happy about the price fixation.
He said that beside fall in Brent Crude Oil other
factors are dominant in the price adjustment.
Spelling out the factors leading to decline in oil
prices, Kirmani said that products like Naptha should also move down to
cut the prices of motor gasoline, high-speed diesel and other range of
It may be noted that during the last 15 days the
prices went down sharply and ruled below the $20 mark.
Tariq Kirmani said that period covered by this price
review has shown a considerable decline in all the finished products.
The rupee also appreciated against the dollar during
the last fortnight by almost 1.25 per cent, thereby helping in further
reduction in the overall product prices.
The war risk insurance surcharges however continue to
be levied on imports causing marginal negative impact on the oil prices.
Reduction in international prices of petroleum
products is accordingly being passed on to the consumers. This reflects
that the government decision to immediately revise the consumer price on
a fortnightly basis was a step in the right direction.
The Organization of Petroleum Exporting Countries
(OPEC) reaction to the declining prices is still uncertain although it
has indicated to consider reducing the crude oil output by around
700,000 barrels per day if weak prices persist.
Currently, the average of OPEC basket of crude is
below the benchmark of $22 per barrel.
The Oil Companies Advisory Committee adjust prices on
the prescribed mechanism by the ministry that there are several elements
such as C&F prices, landing charges, government levies, inland
freight expenses and dealers and distributors commission.
In accordance with the prescribed pricing mechanism
approved by the Ministry of Petroleum and Natural Resources, GoP, the
OCAC notifies the revised Ex-depot fixed sales price at 29 designated
Meanwhile, Pakistan State Oil has also reduced the
low-sulfur furnace oil (LSFO) price by 15.36 per cent and a 4.53 per
cent cut in high-sulfur furnace oil (HSFO).
This attractive price reduction in LSFO and HSFO
price bring down LSFO prices from Rs14, 984 to Rs12, 682 per ton
providing a huge relief of Rs2, 303 per ton to the consumers. The
selling price of HSFO has been reduced from Rs12341 per ton to Rs11868
per ton giving a net relief of Rs563 to the bulk consumers.
The industrial consumers like power generating
companies; sugar, cement and other large-scale industries use the
furnace oil it may be noted. Despite passage of a week, no announcement
has come out so far by any bulk consumer for reduction in products to
pass on the benefit to the end users. The cut in fuel prices would be
meaningless from end-users' point of view if it is not passed on to them
accordingly. The government should make it mandatory for the bulk
consumers that the downward price revision should also be passed to the
grass root level it really desire to make the price mechanism meaningful
and result oriented.