Senate panel asks govt for steps to avert diesel crisis

The Committee was informed that 26-day stock was available and stock for the next month is also available. The Chairman Senate Committee lamented the fact that PARCO and Attock Oil Refineries do not supply diesel and all the onus is on the Pakistan State Oil (PSO) for diesel supply.

Chairman of the Committee Senator Abdul Qadar recommended sharing the burden of PSO for the supply of diesel and taking practical steps to resolve the issue of High Speed Diesel (HSD) shortage in the next harvesting season. The Ministry officials apprised the Committee that to avert any shortage in the market, confidence should be given to Oil Marketing Companies (OMCs) that the price differential shall be promptly paid. The Committee was also informed that the expected Price Differential Claim (PDC) for March 1-15 is Rs 883m rupees, however, in subsequent fortnights, it is expected to be around Rs 30b rupees, depending upon international oil prices.

The consumer price for oil is expected to be 28 Rs/litre by the end of March, however, the prices will balance down in April, the ministry informed. The Committee observed the government is giving 20 -22 arab in the shape of cross-subsidy annually.

The Committee received a comprehensive briefing from the Ministry of Energy (Petroleum Division) on the Government’s strategy to handle the oil import and prices in the current scenario of the Russia-Ukraine conflict. The Committee was apprised that the Prime Minister had announced a relief package on 28th February 2022, and there will be a reduction in the consumer price of Motor Spirit (MS) and High Speed Diesel (HSD) by Rs10/litre. It has also been committed to keeping the prices stable till the end of the fiscal year. Petroleum Levy will be Rs 1.81/litre on Motor Spirit and zero on High Speed Diesel.

The Committee was also informed that a price differential of Rs 2.28/litre on HSD will be paid to the oil marketing companies and refineries. It was also informed that the OMC’s Refineries may need higher working capital limits on account of the price differential. The committee was informed that the mitigation efforts also include the ECC-approved budget of Rs 20b with a quick mechanism to pay PDC to OMCs/Refineries through OGRA and PSO within seven days after each fortnight. A total of five cargoes of 27 MT through its long-term G2G supplier, Kuwait Petroleum Corporation, are expected in March and remaining in April this year.

The Senate Standing Committee also discussed Government plans to reduce and pay–off circular debt in the gas sector at length. The Ministry lamented that the companies are victims of the Government’s policy to subsidize gas. The Committee was briefed that the new laws have been enacted empowering the OGRA to notify the sale price already determined if the government does not give timely advice on the prices within a period of 40 days. The new law has also enabled ORGA to revise the gas prices. The average consumer price in 2021 was Rs 314(selling price) at Rs 758. The Committee was informed that sales prices are not proportionally revised, resulting in a rising differential. The increasing domestic gas consumers’ share resulted in lower cross-subsidization by higher-paying sectors. Sui companies have been directed not to issue any further household connections to tackle rising GDS and shortage of gas in the country.

The Committee was informed that the gas chain differential margin (GSD + LNG diversion) is growing at a faster pace than the power chain circular debt (growth of 18 times in 5-year vs 3.3-time in power circular debt). Besides, the percentage of GDS/LNG to power sector circular debt grew from 5 to 29 pc. It was apprised that the gas differential and RLNG diversion grew by 4 times in 3 years. The Ministry suggested that price revision is essential to containing further accumulation. The Ministry briefed that Circular Debt (CD) is the outcome of policy choices by the Gross Operation Profit (GOP) through sub-optimal cross-subsidization. The GOP cannot keep both the industry and domestic sector happy at the same time. Chairman Committee Abdul Qadir proposed recommendations that the CNG import should be allowed by either the PLL or the CNG private stakeholders themselves, rather than the Government through the process of diversions so that the burden on the Government in the supply of gas can be shared and the issue of circular debt can also be resolved.

The committee was also briefed on reasons for the reduction in PLL’s quantum of LNG imports, including the unprecedented high spot market prices. The Committee was briefed that the PPL has received about 143b rupees. Other reasons include problems related to credit security limitations and non-supply by term suppliers, the Ministry informed.

The meeting was attended by Senators Fida Muhammad, Mohsin Aziz, Aon Abbas, Prince Ahmed Omer Ahmedzai, Sarfaraz Ahmed Bugti, Saadia Abbasi, Attaur Rehman, Shamim Afridi, Saifullah Abro and Senator Syed Muhammad Sabir Shah. Officials from the Ministry of Petroleum Division, Chairman OGRA, OGDCL, Pakistan State Oil, SSGCL and PCL were also present.

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