ISLAMABAD   - Ministry of Petroleum & Natural Resources and Oil and Gas Regulatory Authority (Ogra) are at loggerheads over giving transportation cost on high-speed diesel (HSD) to Pak Arab Refinery (PARCO).
Well-informed sources aware of the development told The Nation that the regulatory authority (Ogra) has written a letter to the petroleum ministry and strictly opposed with the petroleum ministry’s proposal to give 18paisa/liter transportation cost on high-speed diesel (HSD) to PARCO. The regulator in its letter also said that the refinery was earning billion rupees profits and lucrative benefits besides getting heavy tax exemption from the govt.
Quoting Ogra’s letter, official sources at finance ministry , on the condition of anonymity, said that by giving transportation cost on diesel to PARCO, ex-refinery price of HSD would go up by 18 paisa per liter while so far PARCO had earned Rs74billion and 88crore profit during last five years. They also said that the government had given the guarantee of guaranteed profit of 25 per cent beside tax exemption facility to the refinery.  “In view of the Federal Government’s policy of liberalisation and deregulation in the petroleum sector, it is recommended that PARCO crude transportation cost recovery on POL products be deferred till complete deregulation of petroleum pricing in the midstream and upstream sector. The above proposal will add to HSD price about Rs0.18 per litre, which is not appropriate, keeping in view the profitability of the refinery,” quoting the letter one of the official said.
Earlier, Ministry of petroleum and natural resources had sought Economic Coordination Committee’s approval to give transportation cost to PARCO over the transportation of HSD for refining purposes from Karachi to Muzaffargarh, according to a copy of petroleum ministry’s summary available with The Nation.  PARCO refinery since its establishment has been given various protection and incentives by the Federal Government including 25 per cent guaranteed return regime and import parity price based on its Implementation Agreement & Petroleum Policy 1994. As a result PARCO has been earning handsome pre-tax profits. PARCO earned Rs23.458 billion profit before taxation in 2007-08, Rs5.783 billion in 2008-09, Rs 12,339 billion in 2009-10, Rs 22,600 billion in 2010-11and Rs10, 705 billion in 2011-12.
The sources also told that inflation hit masses would bear additional burden worth Rs1billion and 88crore annually with effect to approval of the ECC. Next meeting of the federal cabinet’s economic coordination committee (ECC) would take a decision in this regard, they added.
When contacted with energy experts, they said it would be unfair to give heavy profit and transportation cost to PARCO prior to the complete de-regulation of petroleum products (POL) in the country. They also said that the estimated annual impact of the crude transportation reimbursement on HSD would be Rs1.26 billion annually and per liter incidence on the HSD price would be Rs0.18 per litre. Existing annual crude reimbursement of petrol and light diesel oil is Rs945.37 million annually. They were of the view that as per import parity price, PARCO was allowed to include applicable inland freight from Karachi to PARCO in its ex-refiner prices till the same were regulated. However, after controlled deregulation in June 2011, PARCO was allowed to include crude pipeline transportation rates in its ex-refinery prices of petrol, light diesel oil and HOBC (High Octane Blended Component) instead of the applicable road freight on the same. This decision of the federal government resulted in passing the benefit of deregulation to the POL consumers and prevented PARCO from charging higher road freights. The government, in continuation of the policy of de-regulation and liberalisation of petroleum products in the country, deregulated the fixation of ex-refinery price of high-speed diesel duly approved by the ECC on October 4, 2012 and decision was implemented with effect from October 17, 2012.  It is to note here that so far OGRA had not allowed the transportation cost on HSD to PARCO and declared that approval for inclusion in the IFEM was required from the competent forum.