OMCs’ HSD premium: ECC directs PD to develop certification mechanism

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has directed the Petroleum Division to develop a mechanism for certifying the premium of OMCs on imported HSD, official sources told Business Recorder.

On November 18, 2022, the Petroleum Division informed the forum that the ECC while considering its summary titled, ‘High Speed Diesel (HSD)/gas oil premium” in its meeting held on November 4, 2022 had allowed premium on HSD imports subject to maximum capping at $ 15/BBL for importing Oil Marketing Companies (OMCs) during November and December 2022.

However, oil industry expressed serious concerns on procurement of HSD, as the product molecule was either not available in the Gulf market (due to increased demand of the product in the western and European market) or higher premiums were being charged in view of country specific risk in relation to supplies to Pakistan.

Consequently, the matter was again placed before the ECC for allowing premium on HSD import without capping at any upper limit. ECC considered the matter again in its meeting held on November 14, 2022 and allowed premium on HSD import for November 2022 only, subject to maximum capping at $ 16.75/BBL.

It was stated that the ratification of the decision of the ECC on the subject summary from the Federal cabinet was still awaited. Meanwhile, PSO’s spot tender opened on November16, 2022for HSD delivery during 26 Nov - 05 Dec, 2022, turned out to be non-responsive, as no valid bid was received.

It was apprehended that currently product was short in the international/Gulf market and procurement thereof would most likely be at higher premiums/prices. Any further delay in decision making on premium issue would make procurement difficult, discouraging the OMCs to import, accordingly, there might be a strong chance of HSD shortages in the country.

The Petroleum Division/Ogra proposed that PSO’s weighted average premium (KPC & Spot) may be applied for HSD price computation as per Federal Government applicable policy guidelines.

Upper limit of premium raised to $15/barrel: OMCs allowed to recover Rs10/litre on HSD for 2 months

In case of higher HSD premium paid by importing OMCs other than PSO, the differential of premium may be conveyed by Ogra with relevant documents for consideration and approval of the ECC of the Cabinet before its adjustment through IFEM.

The ECC held threadbare discussion on the issue and observed that due to disconnection of fuel supply from Russia to Europe, there was an increase in demand of High Speed Diesel in the international market. It was apprehended that this might not only lead towards increase in prices of HSD but also create shortages in the country.

It was suggested that in order to ensure availability of HSD in the country, it would be appropriate that OMCs may be facilitated to procure HSD from international market, and for the purpose PSO’s weighted average premium (KPC & Spot) may be applied for HSD price computation as per Federal Government applicable policy guidelines instead of capping on the premium on HSD.

Ogra endorsed it and proposed the following: (i) for uniformity of prices in the country PSO’s weighted average premium (KPC & Spot) shall be applied for HSD price computation as per Federal Government applicable policy guidelines; and (ii) for uniformity of prices in the country PSO’s weighted average premium (KPC & Spot) shall be applied for HSD price computation as per Federal Government applicable policy guidelines; and in case of higher HSD premium paid by importing OMCs other than PSO, the differential of premium may be conveyed by Ogra with relevant documents for consideration and approval of the ECC before its adjustment through IFEM.

After detailed discussion the ECC decided that PSO’s weighted average premium (KPC & Spot) shall be applied for HSD price computation as per federal government applicable policy guidelines.

In case of higher HSD premium paid by importing OMCs other than PSO, the differential of premium will be taken into consideration by Ogra for adjustment through IFEM. The mechanism for certifying the premium of the OMCs on imported HSD shall be developed by the Petroleum Division. This decision shall supersede the ECC’S earlier decision on the case, taken in its meeting held on November 14, 2022.

Copyright Business Recorder, 2022