PRESCRIBED PRICE MAKES PETROL AFFORDABLE

CHAIRMAN PETROLEUM DEALERS ASSOCIATION FOR TAX WITHDRAWAL

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Mar 31 - Apr 06, 2008

While extreme volatility in international oil price passes on upward shiver in the domestic oil price twice in a brief period of a month, there is still a chance to save the local consumers from being suffered further due to the price rise through managing price structure of especially ex-depot price of motor gasoline (petrol) and light diesel oil with adroitness. After a moratorium of more than one year observed back in the beginning of 2007, when the government after decreasing gasoline price by about Rs. 4 put further increase in the oil prices to a halt, it finally uncapped the domestic prices to be derived by the foreign market price mechanism in March this year. Consequently, up in dollars per barrel of crude oil was justified in the start of the month to jack up ex-depot price of local motor gasoline by around Rs. 4 that brought the price of per litre motor gasoline to Rs. 58.70 and concurrently soared consumer prices of diesel, kerosene oil, and other petroleum products. In mid of the same month, prices of petroleum products received another upward revision and price of per litre motor gasoline increased to Rs. 62.81, again a rise of around four rupees. Commenting on the uncertainty in prices of petroleum products, Abdul Sami Khan, Chairman Petroleum Dealers Association advised shift in priorities insofar as consumption of petroleum products is concerned. Foreseeing worsened energy crisis in prospect, he said government must bring slight rectification in overall petroleum policy in order to cope up with the future energy needs. While talking to this scribe, he said government should utilize alternative energy resources to avert any untoward situation. He said about 90 percent of the government vehicles are fuelled with the petrol.

PRESCRIBED PRICE VIS--VIS EX-DEPOT PRICE

The break up of price of petroleum products shows a combination of prescribed and ex-depot price wherein general sale tax adds high surge in the price of motor gasoline particularly. Equalizing of ex-depot price to the level of prescribed price of motor gasoline can give a relief of at least Rs. 10 per litre to consumers because of the low determination of the prescribed price. For example, the ex-depot price of motor gasoline (petrol) in the latest petroleum products price rise was determined as Rs. 62.81 while prescribed price as Rs. 51.25 per litre. Similarly, ex-depot price of light diesel oil per litre was Rs. 38.59 compared to Rs. 30.73 prescribed price. Prescribed price has normally a difference of more than Rs. 10 with the maximum ex-depot price and absorbs usually ex-refinery import parity price, excise duty, petroleum development levy, dealers' commission and distributors' margin of oil marketing companies while ex-depot price per litre of motor gasoline includes general sales tax and inland freight margin. After application of aforesaid levies government may unlikely to loss remarkably in case of waiving GST and freight margin over ex-depot price. General sales tax and inland freight margin are two heads which altogether cause 18 percent cost addition to the ex-depot price per litre, wherein only GST head adds up to approximately 15 percent to the consumer price per litre. Adul Sami suggested 30% taxes on petrol throughout supply chain must be withdrawn so that consumer price of petrol can be lowered down to a suitable level. "Of course commission of oil marketing companies should be justified," he added. Arguably, government can bring down the price of petrol by only eliminating sale tax at least on retail and outlet sale to consumer. In past, the motor gasoline price per litre for direct and retail consumer was different. Government departments, public sector companies, defence, and Pakistan Railways were provided at usual Rs. 3 concession on market price of premium motor gasoline per litre by oil marketing companies. Yet, in mid of 2007 the disparity was called off.

CUT IN DOWNSTREAM OIL DEMANDS

Alternative source of energy to meet downstream requirements such as of public provides competitive advantage amid rising cost of primary sources of energy. Often, industrial processes highly depend on imported oil products so that the industrial requirements can not be suppressed. However, when the import bill of crude oil is touching an all time high record, shift in energy consumption puts its importance up front. This shift is important in relation to public transportation sector wherein CNG use must be promoted, he said. Abdul Sami, who also holds additional chairmanship of CNG Dealers Association, said CNG air-conditioned public transports must be introduced to dissuade private transportation. He thinks public transport can decrease the instances of futile energy consumption. Since Pakistan in general and Sindh in particular is self sufficient in terms of natural gas resource, we wouldn't be running out of it as earlier. However, he said, government should fix the CNG price at least for five years. So far, 2,000 CNG stations have been set up across the nation and 1000 underway. Abdul Sami underscored that petroleum policy of the last government even if required correction has been favourable for the growth of oil and petroleum industry of the country. He expressed his fear that the next government would not continue the business friendly petroleum policy of the last government.

Responding to a question, he said seeking substitute of primary energy can enhance the scope of exploiting home based natural resources and push up the national efforts to become economically sustainable. Obviously, Pakistan has abundance of natural resources and can fulfil national energy needs for years while major portion of the crude oil is imported giving extractions in form of LPG, naphtha, motor gasoline etc. to meet the local demands. While complete sustainability of economy is neither scientifically possible nor suitable economically, transformation in local energy consumption pattern can refrain sponging off billions of precious revenue in import. In addition to this option of passing on price benefits to consumers of petroleum products in the wake of turmoil-shaken international oil and petroleum industry would be a token of citizenry sustenance by the government.