June 09 - 15, 2008

Petrol pump owners in particular and oil companies in general are making money through storage of petroleum products every time before the raise in petroleum products prices.

Petrol Pumps administration and dealers have cartelised and also used to create artificial oil shortage to mint money during expected hike in oil prices.

The industry sources told PAGE that the petrol pumps run by major oil companies have also emerged as the main players who are manipulating the situation to make undue profit. They said that some pumps also used to create artificial shortage of petrol whereas others create scarcity of diesel. Sources also said that pumps being run by small Oil Marketing Companies (OMCs) have also join hands to make undue profit.

When interviewed, the employees of some petrol pumps in Lahore said that their owners used to get the petrol and diesel every time ahead of hike in the products. However, profit earn through this exercise is not passed on the employees who were facing hard time due to high inflation.

When contacted, a senior executive of a major oil company denied that administration was exploiting the situation by creating shortage. When asked whether dealers were involved in creating shortage by stocking the oil, he also defended them that there was no such situation.

However, sources claimed that dealers had also become the part of the game of creating so called shortage. They said that these dealers had also stocked the oil to make unjustified profit.

Analysts say the consumers can be somewhat benefited, if the price structure, especially of the ex-depot rates of petrol and light diesel oil are managed with prudence.

The break- up of price of petroleum products shows a combination of prescribed and ex-depot price wherein general sales tax inflates the price of petrol. Equalising of the ex-depot price to the level of prescribed price of petrol can give a relief of about Rs10 per litre to consumers because of the low determination of the prescribed price, they adds.

Usually, prescribed price has a difference of more than Rs10 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 these levies, the government is unlikely to lose by waiving GST and freight margin over ex-depot price. There is no likelihood of setback in distributor or dealer profit margins in case of bringing ex-depot price at par with the prescribed price.

General sales tax and inland freight margin result in approximately 18 per cent cost addition to the ex-depot price per litre, wherein only GST head adds up to nearly 15 per cent to the consumer price per litre, they say.

A spokesman of Petroleum Dealers Association asked the government that 30 per cent taxes on petrol (motor gasoline) throughout supply chain must be withdrawn to lower consumer price of petrol to a suitable level. The government can bring down petrol price by eliminating sales tax at least on retail and sales outlet to consumers, he argued.