RESPONSIBILITY OF PRICE REVISION OIL PRODUCTS BEING SHIFTED FROM OCAC TO OGRA
FROM SHAMIM AHMED RIZVI, ISLAMABAD
Apr 03 - 09, 2006
The responsibility of price fixation of the oil products is being shifted from Oil Companies Advisory Committee (OCAC) to Oil and Gas Regulatory Authority (OGRA) from next month, well placed sources in the Petroleum Ministry told PAGE.
It is being done despite strong opposition from OCAC - a body representing to five leading Oil Marketing Companies (OMCs) and oil refineries, which had been, assigned the task of price fixation under dubious circumstance without any logic or justification. The rationale and prime objective behind creation of OGRA was that it would decide pricing of both gas and petroleum. Till to date, the regulatory authority is only looking after the area natural gas as its only domain while rich oil sector is managed by the OCAC.
It is generally complained that during the last 6 years, OCAC has been allegedly involved in manipulation billions of rupees additional profits for its parent companies, at the cost of poor consumers of this country. The government primarily executes contrary to this allegation, the OCAC claims that it is operating only as a front man of the government otherwise the pricing formula. The only job done by OCAC is to announce the revised oil prices by the government. However, if it is taken as true and OCAC has no interest or role in price fixation than what is the point in opposing the shift of responsibility from OCAC to OGRA is another question to think over?
How the OCAC has been ripping off the poor consumers in this country by arbitrarily fixing the POL process on fortnightly basis can be judged from the following: -
On 1 September 2005, OPEC's basket price reached $ 61.37 a barrel, the highest ever. On 1 September 2005, HOBCs ex-depot sale price in Pakistan stood at Rs. 58.40 per litre. By December 1 OPEC's basket price had fallen by a hefty $ 10.66 a barrel or a wholesome 18 percent. By December 1, OCAC had increased the price of HOBC by more than seven per cent to Rs. 62.77 a litre. As of December 1, our ex refinery cost of HOBC was Rs. 24.67 per litre while Pakistani consumers at the pump were being charged Rs. 62.77 a litre, a difference of Rs. 38.10 a litre. The price at the pump includes petroleum levy of Rs. 21.66, excise duty of Rs. 0.88 and sales tax of Rs. 8.19 a litre for a total of Rs. 30.73 a litre all going back into government confers.
As per of fiscal OCAC data, Oil Marketing Companies (OMC) makes Rs. 2.19 a litre and the dealers get Rs. 2.51 a litre. Then there is a Rs. 10 billion fraud in the name of 'Inland Freight'. Refiners and OMCs in league have charged up to Rs. 12.23 per litre for transporting oil (The World Bank estimates that Inalnd Freight ought to be around Rs. 1.25 a litre). As per official data, OPEC's basket price averaged $#36.05 per barrel in 2004." That average equates to an ex-refinery cost of Rs. 18 a litre while HOBC during most of 2004 was sold for over Rs. 40 a litre.
There is little or no correlation between what oil costs in the international market and what Pakistani consumers pay for it. Furthermore, there is little or no co-relation between what the Government of Pakistan pays for oil that it imports and what Pakistani consumers pay for the same oil.
PETROLEUM SERVICES COMPANIES
M/s Compagine Generale De Geophysique (CGG)
M/s Schlumberger Seaco Inc.
M/s LMK Resources (Pvt) Ltd.
M/s Weatherford Enterra Oilfield Services & Products.
M/s Furgo Geodetic Ltd.
M/s Chem Agro International
M/s Pride Forasol
M/s Baker Hughes INTEQ
M/s Core laboratories
Geofizyka Krakow Ltd.
Schlumberger Sedco Forex
ADOS Pakistan Ltd.
M.I. Drilling Fluids International
Energy Resources Development Ltd.
Pakistan Tubular inspection Services (Pvt) Ltd.
Petroleum Geoservices Asia Pet Ltd.
DEAUTAG Pakistan Branch
M/s Schlumberger Sedco Forex Int.
M/s Dowell Schlumberger
M/s Haliburton Limited
M/s Petrolog Private Limited
Ahmad Jaffar & Company (Pvt) Ltd.
M/s Oiltools Limited (Pakistan Branch)
M/s Petroleum Geo-Services Asia Pet Ltd.
M.I. Overseas Limited
M/s bureau of Geophysical Prospecting(BGP)
M/s Geoservices Eastern Inc.
M/s Anadrill International S.A.
M/s Nuricon Union (Pvt) Ltd.
Pak Petro Services
REPRESENTING VERITAS DGC LAND
Greatwall Drilling Company
Nortech Surveys Pakistan (Pvt) Ltd.
Oil & Gas Exploration Company Cracow Ltd.(OGEC)
OCAC has ten members, four refineries and six OMCs Shell, Caltex, PSO, Attock Petroleum, Total, Bosicor, Attock Refinery, National Refinery, Pak-Arab Refinery and Pakistan Refinery. When CCAC increases the retail price of oil all its members make tons of money in 'inventory gains'. Before there was OCAC fixing prices, National Refinery used to make RS. 23 million in profits. In 200405, National Refinery made over Rs. 2 billion (National Refinery is owned by Attock Oil Group). The Government of Pakistan has, in effect, set 10 wolves to guard 160 million Pakistani sheep.
The credit for exposing this criminal racket (which could not possibly go on for so long without connivance and support of some high-ups in the government) go to Chairman of the Senate standing Committee on Petroleum and Natural Resources, Syed Dilawar Abbas, who in a meeting in November 2005 strongly opposed the price fixation authority of OCAC and pointed out publicly how they were fleecing the poor consumers.
Senator Dilawar, who has 26 year experience in oil, chemicals and cement industries with a multinational group, said he was unable to comprehend the logic behind delay in assigning the price fixing task to OGRA, adding that the name of the authority clearly stated its domain, i.e., oil and gas. "The rationale or prime objective behind creation of OGRA was that it will decide pricing of both gas and petroleum products. But till to date gas is its only domain," he said. He opposed the POL products price fixation by the Oil Companies Advisory Committee (OCAC), saying it tantamount to benefiting the multinationals at the cost of the masses.
In its recommendations, the committee strongly demanded that OGRA be given the task of fixation of POL products prices, keeping petroleum development surcharge at zero till the prices of crude and by products in the international market come down and stabilize.