KARACHI - The proposed shifting of oil pricing power from Oil and Gas Development Authority (OGRA) to refineries is likely to increase the rates of different petroleum products by Rs1-1.5 per litre across the country. However, if the current mechanism of Inland Freight Equalization Margin (IFEM), regulating parallel to OGRA, gets abolished, the oil prices are expected to witness a decline of Rs1-2.5 per liter in the southern parts of the country, energy sector analysts said. The government is reportedly to introduce oil price deregulation policy in next few days. As per details available, the refineries will only be given right to determine the prices of petrol, kerosene and jet fuel, but the prevailing pricing mechanism of diesel and furnace oil will remain unchanged and be regulated by OGRA. The government was initially supposed to bring this policy in last budget but due to lack of consensus amongst the major players in oil industry, the decision was postponed. Farhan Mahmood, an analyst at Topleine Securities while talking to The Nation, said there is a less probability of bringing quick change in the present oil pricing system as the de-regulation of oil pricing is a complex procedure especially, when local refineries and oil marketing are working separately unlike int'l practices, which operate under one roof (vertically integrated). He estimated that in case the government implements de-regulation policy, there will be price variation of Rs0.2-2.5 per liter on various oil products from southern to northern regions of the country. The impact could vary depending upon the refineries efficiency and processing cost. Nevertheless, the major reason of price variation could be the elimination of IFEM which is a tool to equate local oil prices throughout the country. Thus IFEM is actually the transportation cost between refineries and the depots. The price variation could be higher in upper parts given the fact that out of 5 big refineries in Pakistan 3 are located in southern region while only 2 are in central and northern region of the country, he said He further said diesel has a major share of 33 per cent in local energy products with relatively better margins, thanks to the deemed duty which local refineries get as an incentive so that their margins will be protected. Moreover, furnace oil (FO) is already de-regulated which account for 32pc of total oil production. Thus if we exclude diesel and FO, the deregulation of other oil products like petrol, kerosene and jet fuel (combined weight of 25pc in overall energy oil product), the impact of deregulation would be merely significant, he added. While analyzing the impact of this proposal on refineries, he said, NRL would be better of due to the fact that it has reasonably low refining cost with better valued product (83pc) whereas BYCO and PRL looks like their refinery cost is lowest but their share of valued product is also lowest (52-58pc) compared to other listed refineries. Hence even their refinery cost is lowest but any de-regulation would not affect their earnings much due to their product mix. Though it is healthy for overall market competition, however, it will be negative for those OMCs which lack back up refinery. With the introduction of this, there will be more competition among OMCs to sustain market share, he observed.