ISLAMABAD - Another showdown between the government and opposition parties is expected as the cash-strapped administration is likely to launch another push for an increase in the prices of petroleum products on January 31.
The government will again be walking a tightrope when the proposal is presented during the meeting of the parliamentary committee that will review the petroleum products pricing mechanism and also during the PPP-PML-N talks on proposed economic reforms. An official source said the government was undeterred by the flat refusal by the parliamentary committee on the envisaged price hike of 13 percent in petroleum prices.
“We are hopeful that the members will adopt a flexible approach during the next meeting,” he said, adding that it was a difficult situation with the government being under tremendous fiscal deficit. The surge in petroleum prices in international markets had compelled the government to increase petrol price by 13 percent (Rs 9.43 per litre) and diesel price by 12 percent (Rs 9.20 per litre) from February 1.
The government had already absorbed Rs 12 billion in price differential during the last three months and the continuing the mechanism would yield Rs 30 billion during the second half of the current fiscal year. Similarly, the revenue target from petroleum products was projected at Rs 300 billion for the current financial year, and an amount of Rs 85 billion was generated during the first six months of the current financial year.
An official said the government was working to discontinue power and fuel subsidies, as they were holding the economy hostage. On average, he said, the electric power was being generated at Rs 10 kilowatt/hour, which was subsidized at Rs 7 per kilowatt/hour for the consumers. With the net subsidy of Rs 3 per kilowatt/hour, the government has provided Rs 85 billion in subsidy during the first six months of the current fiscal.
He said the oil share in the total energy mix of the country was around 30.5 percent during the year 2009-10. The annual demand for petroleum products in the country is about 20 million tonnes, 400,000 barrels a day, of which only 13 percent was met through local resources, while the rest was being imported in shape of crude oil. The import volumes of crude oil, HSD and furnace oil were seven million tonnes, 4.6 million tonnes and 6.6 million tones, respectively, during the year 2009-10, for which the import bill was around $10 billion.
The estimated import volumes of crude oil, HSD and furnace oil are 8.4 million tonnes, 4.0 million tonnes and nine million tones, respectively, for the year 2010-11, for which the import bill was estimated at $12 billion. Under the approved import parity pricing formula, ex-refinery prices are linked with international (Arab Gulf) market prices of petroleum products.
The price of local crude oil is also linked to international market prices. The ex-depot sale prices of petroleum products are uniform up to 12 storage depots spread across the country and OGRA determines the inland freight equalization margin (IFEM) on a monthly basis.