Feb 07 - 13, 2005

The recent increase in oil prices by the Oil Companies Advisory Committee (OCAC) has sent jolting shock waves to all segments of the society reflected in the sharp reaction by the provincial assemblies of the federating units of the country, which have demanded of the government to recall the upward decision.

The abbreviation of OCAC which has increased POL prices for the third time just in two months has becoming a nightmare for the people belong to average income group. Though the government on its part in a bid to justify the decision has referred the oil prices in other countries, which are higher than Pakistan, but they forget to look into the income level of the people in this country, which is also much lower than the countries they are referring to.

The POL products, which eventually play the role of the fuel for the engine of economic growth in literal sense severally disrupt to the economic growth, which has just reached at the take off point.

It has already started affecting adversely the flow of the economic cycle to a large extent as recent increase in the POL prices are feared to impair efforts for producing export surplus in the country. It is extremely painful that the OCAC mainly dominated by the multinational companies was so arrogant as its members do not bother to response to the calls of the members of the press for explaining the rationale behind continuous increase in oil prices. It is also shocking to note that the OCAC headed by the CEO of a multinational company simply refused to accept the notifications issued by the federal government regarding nominations of the representatives from the public sector into the fold of the committee. Surprisingly, the government was also supporting the OCAC decision with out taking into account the sharp reactions from all major segments of the economy including industry, transport, political parties and above all the resolution passed by the provincial assembly of NWFP.

Prime Minister Shaukat Aziz has said that the government was heavily subsidizing the oil prices to the tune of Rs 40 billion while POL prices were 30 percent lower as compared to the price level in many countries.

It is for the first time that political leaders have reacted strongly against the increase of POL prices, otherwise only affected segments of the economy like transporters and industrialists used to protest over increase in oil prices.

Prime Minister Shaukat Aziz had promised and had extended assurance that POL prices would not increase and would remained capped for a certain period, Chairman SITE Association of Industry Dr. Mirza Ikhtiar Beg told PAGE.

He said that shooting up oil prices and other utilities like electricity etc have rendered the cost of production uncompetitive in the export market.

How our industrial products would survive in the face of onslaught under the WTO regime when the prices of electricity and oil, which are the essential industrial inputs, have gone beyond the level of affordability, said the SITE Chief.

The national economy had just arrived at the point of a take off but such adverse eventualities if not checked effectively are feared to make all efforts in vain, he observed in a depressing note.

Chairman All Pakistan Petroleum Dealer Association, Abdus Sami Khan, said that as a result of exorbitant increase in POL prices, it would give way to the smuggling of POL products from neighboring borders of Iran.

Transporters on the other hand were of the view the government has virtually given reigns of the oil sector into the hands of foreign elements in the shape of OCAC. The POL products pricing mechanism is practically tailored by foreign multinational companies.

It is worth mention that the present chairman of the OCAC hails from Caltex while the Secretary General represents Shell Pakistan. The six-member committee of the Oil Marketing Companies comprised of Farooq Rahmatullah Chairman and Managing Director of Shell Pakistan, Emmanue Laurenty Chief Executive Officer of Total-Parco Pakistan, Tariq Kirmani MD PSO, Nadeem A. Jaffery Country representative of Caltex Oil, Shuiab A. Malik from Attock Petroleum and a member from Bosicor Pakistan Limited.

"How PSO can make comments over the recent increase in oil prices as it was a unanimous decision by all the major oil Marketing Companies as the member of the OCAC," remarked a PSO official when asked for comments of Tariq Kirmani who is the Managing Director of PSO.

The OCAC has increased the ex-depot sales price of petrol by 89 paisas per liter to Rs40.39 from Rs39.50 per liter, while the price of high-speed diesel (HSD) increased by 25 paisas to Rs26.21 from Rs25.96 per liter. HOBC and kerosene oil prices have been raised to Rs44.59 and Rs26.04 per liter from Rs43.73 and Rs25.50 per liter, respectively. Light diesel oil (LDO) has become costlier by 51 paisas to Rs22.92 from Rs22.41 per liter. Revised prices will be effective from Dec 15.

OMCs and refineries are tight lipped in giving a clear picture whether the government has started recovering the petroleum development levy (PDL) or it is still absorbing the loss. Market sources said that the government has started the recovery of PDL from Dec 31, 2004.

OCAC while defending the decision is of the view that the government had suffered a budgetary hit of Rs40 billion since May 1, 2004, and continues to absorb the loss.

Though international oil prices had eased a little bit they, nevertheless, continue to remain substantially higher than May 2004. It is in this perspective that a minor correction in POL pricing is being done. The OCAC claims that the prices of POL products in Pakistan, however, remained substantially lower than the neighboring country.

The MNCs in order to have absolute authority on OCAC have refused the entry of one of the nominated member from public sector, Abdus Sami Khan, Chairman of All Pakistan Petroleum Dealers Association. There are only two classifications of OCAC members, one Refinery and second Oil Marketing companies. From refineries there are four members including Raziuddin the Chief Executive of Attock Refinery, Qaiser Jamal Managing Director of National Refinery, Shahid K. Hak Managing Director of Pak-Arab Refinery and Zafar Haleem General Manager and Chief Executive Officer of Pakistan Refinery.