Karachi
President Pakistan Businessmen and Intellectuals Forum & All Karachi Industrial Alliance, Chairman National Business Group Pakistan, Chairman FPCCI Policy Advisory Board and Former Provincial Minister Mian Zahid Hussain has said that shifting petroleum prices from weekly to daily determination is an important economic reform, but it should not be implemented without complete transparency, a clearly defined mechanism and meaningful consultation with oil marketing companies and petrol-pump owners.
He said that according to the government, daily price determination will reduce political intervention, limit opportunities for extraordinary profits and allow changes in international oil markets to be reflected more quickly in domestic prices.
OGRA has indicated that it will publish daily price data, while the new system is also expected to cover the Inland Freight Equalisation Margin, refinery adjustments, stock management and a mechanism for subsequently adjusting price differences.
Mian Zahid Hussain said that the proposed measures and rules must be finalised before full implementation because petroleum prices directly affect transport, agriculture, industry and household expenditure.
The latest increase demonstrates the risks associated with the new system. From July 18, the price of petrol was increased by Rs. 5.44 per litre to Rs. 316.15, while high-speed diesel rose by Rs. 31.05 to Rs. 354.35 per litre. He said diesel is widely used in trucks, public transport, tractors, harvesting machinery, construction equipment and electricity-generating units.
Therefore, an increase of more than Rs31 per litre will immediately raise freight charges, food-distribution costs, agricultural expenditure and industrial production costs.
Mian Zahid Hussain said that the Sensitive Price Indicator had already increased by 1.40 percent during the week ending July 16 and reached 357.61. Since the latest diesel-price increase took effect after that reporting period, its full impact may become visible in the coming weeks through higher transport fares and increases in the prices of vegetables, flour, construction material and other essential goods.
He said that the Oil Companies Advisory Council has described daily pricing as an important step towards deregulation, competition and market-based price determination.
However, oil marketing companies, refineries and industry representatives have also raised serious concerns regarding supply-chain operations, timely availability of data, valuation of existing stocks and the sale of fuel purchased at one price after a new price becomes effective. Rapid changes in prices may create major transparency and reconciliation issues if these matters are not resolved in advance.
Mian Zahid Hussain said that petrol-pump owners have strongly opposed the policy in its present form and have warned of nationwide protests and a possible strike. They maintain that daily price revisions could cause losses on existing stocks, disrupt oil-tanker movements and create administrative complications at approximately 15,000 retail outlets.
He said that the credibility of the daily pricing system will depend on whether every change in international oil prices is passed on to consumers promptly in exact consequence. Increases must not be transferred immediately while reductions are delayed.
OGRA should online publish a complete daily price calculation showing the international benchmark, exchange rate, import premium, ex-refinery price, freight margin, petroleum levy, carbon levy, OMC margin and dealer commission.
Mian Zahid Hussain proposed the establishment of a broad-based committee comprising the government, OGRA, State Bank, economic experts, FPCCI, relevant stakeholders and consumers to oversee the daily pricing framework.
He further said that a uniform implementation time across the country and a transparent mechanism for adjusting differences in the value of existing stocks are essential.
Daily pricing may improve transparency, but it must not become a source of daily uncertainty for businesses and consumers.
The government should implement the system only after securing stakeholder consensus, ensuring uninterrupted supplies and guaranteeing that every reduction in international prices is passed on to consumers with the same speed as an increase.
