Islamabad  -  The Federation of Pakistan Chambers of Commerce and Industry (FPCCI)’s Businessmen Panel (BMP) has rejected yet another increase in prices of petroleum products in just 15 days, as despite a decline in the international market, the government has increased the prices of petroleum products which is unjust and unfair. The FPCCI former president and BMP Chairman Mian Anjum Nisar asked the government to bring down the prices of utilities to the regional competitors besides lowering interest rate which is also very high when compared to the other countries.

He remarked that at a time of unsatisfactory export volumes and low industrial growth, the hike in oil products alongwith constant raise in electricity and gas tariffs for the industry, especially for the SMEs, was really surprising. If the decision is not withdrawn, it will prove dangerous for the country’s SME sector, he stressed. The average prices of petrol and HSD decreased in the international market by about $1.5 and $2.5 per barrel, respectively, after October 15. The average price of petrol had dropped to about $76 per barrel from about $77.5. The price of HSD also declined to about $84 per barrel from $86.5 in the last fortnight.

He said that the businessmen were hoping that the prices of petroleum products would go down, but the government increased the rates to offset inventory losses incurred by oil companies after the last price revision on November, saying the massive jump in electricity base rates and petroleum products prices would make local products uncompetitive in the international market. The BMP chairman observed the move came as a surprise as experts were hoping for a reduction in the prices of petroleum products. According to an official announcement, the federal government on Saturday increased the price of petrol by Rs3.72 per litre in line with fluctuation in global oil prices effective December 1. It also hiked the price of high speed diesel (HSD) by R3.29 per litre. However, the price of kerosene oil has been slashed by Rs0.62 per litre and light diesel oil (LDO) by Rs0.48 per litre.

The finance ministry in a statement said that the Oil and Gas Regulatory Authority (OGRA) had worked out the consumer prices of petroleum products as per variation in the oil price in the international market. The price of petrol has witnessed an increase of Rs3.72 per litre, going up from Rs248.38 to Rs252.10 per litre. The price of HSD has also been raised by Rs3.29 per litre, from Rs255.14 to Rs258.43 per litre, due to fluctuation in global oil prices. Petrol is used in motorbike and cars and its demand has increased since the government cut indigenous gas supplies to CNG retail outlets in Punjab several years ago. CNG stations in Punjab now use imported gas, price of which is double that of indigenous gas. As a result, CNG has become uncompetitive in the province.

HSD is primarily used in the transport and agriculture sectors. Therefore, fluctuations in its price will have a direct inflationary impact on consumers. Likewise, the price of kerosene oil has come down by Rs0.62 per litre from Rs165.60 to Rs164.98 per litre and LDO by Rs0.48 from Rs152.21 to Rs151.73 per litre. Kerosene oil is used in remote areas, especially in the northern parts of the country, where LPG is not available for cooking purposes. The Pakistan Army is its key user in the northern region due to the cold weather. LDO is used in the industrial sector. The oil prices also include the Inland Freight Equalisation Margin (IFEM), set at Rs7.50 per litre for petrol and Rs4.15 per litre for HSD. The premium on petrol is $9.80 per barrel. This premium rate applies to the import of petrol and is higher than usual, contributing to the proposed increase in the price of petrol. In the last review, the government adjusted the increase in oil prices within the IFEM, rather than passing it on to the general public, to mitigate the inflationary impact. The government is currently imposing a petroleum levy of Rs60 per litre on both petrol and HSD, a high rate that consumers are paying to help cover the country’s current expenditures.

In announcement, the Ministry of Finance said the petroleum regulator, OGRA, had worked out the prices based on the variations in the international market. However, the fact is that the government had retained a part of the increase in rates due on October 15, hoping that the following quarter would be cheaper. However, this resulted in inventory losses to the oil companies, which also protested against the government. The international prices subsequently came down, but the backlog was on the higher side, forcing the government to increase the prices for the next 15 days. During the current fortnight, the import premium on both petrol and HSD remained generally stable at $8.7 and $5 per barrel, respectively. The exchange rate also stood its ground. Anjum Nisar said that the government also charges about Rs16 per litre as customs duty on petrol and HSD, irrespective of their local production or imports. In addition, about Rs17 per litre distribution and sale margins are going to oil companies and their dealers.