Earlier in August 2022, we informed you about deregulation plans for fuel prices in Pakistan, under which the government has no role in deciding the prices. The then Pakistan Tehreek-e-Insaaf government brought the plan to the table but couldn’t implement it.
In a recent update, the country’s top refiners have raised their concerns, fearing that the deregulation plan could not only halt planned upgrades worth up to $6 billion but also lead to the closure of some refineries.
The Concerns
In a letter to the Oil & Gas Regulatory Authority (OGRA), the state-run Pakistan Refinery and private domestic refiners, including Pak Arab Refinery, Attock Refinery, Cnergyico, and National Refinery, have emphasized the need for consultation before implementing such drastic measures, stating that they are already struggling to operate at full capacity.
The authority proposed the elimination of the rule, allowing the fuel buyers to purchase from local refineries. Refiners argue that these changes could have disastrous ramifications for the industry.
The Oil & Gas Regulatory Authority (OGRA) of Pakistan has suggested allowing oil marketers and refineries to set fuel prices independently rather than having the government dictate prices.
Deregulation Plans
This is the model being followed internationally; however, it could have both positive and negative impacts in Pakistan.
On the upside, introducing competition into the market could lead to fluctuating prices, fostering a more competitive environment where all Oil Marketing Companies (OMCs) strive to offer their best deals.
However, the dominant player, such as PSO in this scenario, stands to gain additional advantages due to its status as a government-run entity. The extent of these benefits will become clearer once the deregulation process is put into effect.
Conversely, an immediate drawback of this potential move was the opposition voiced by petrol pump owners. They argued that they had yet to be consulted, with discussions limited to OMCs by OGRA, which they deem unfair. The representative for petrol pumps emphasized the necessity for their inclusion in these discussions.
What are your thoughts regarding deregulation plans for fuel prices in Pakistan? Tell us in the comments section.
