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LAHORE: The Oil Marketing Association of Pakistan (OMAP) has raised concerns on the pricing mechanism associated with the PMG and HSD sectors in Pakistan.

Chairman OMAP Tariq Wazir Ali in a letter written to chairman Oil and Gas Regulatory Authority highlighted a noticeable incongruity between the premiums extended to the state-owned oil company and those provided to other Oil Marketing Companies (OMCs).

The focal point of this concern revolves around the contrast in premiums allotted to state-owned oil company as opposed to those allocated to other industry participants.

Inventory loss: OMAP says govt decision impacted OMCs in ‘unfavourable manner’

It said the purpose of writing this letter is to bring chairman OGRA’s attention towards the issue that the scope of state-owned oil company’s cargo volumes surpasses those imported by its OMC counterparts, attributable to its substantial market share.

As a result of this scale, the state-owned oil company has been able to secure lower premiums in comparison to what is extended to other OMCs.

According to the letter the industry has been at a disadvantage for HSD due to the G2G agreement resulting in loss of billions of rupee VS state-owned oil company.

Similarly, for Mogas analysis of the situation reveals that an OMC with an average cargo size experienced a net loss of USD 2.30 per barrel over the last eight months of 2023, when juxtaposed with the premium secured by the state-owned oil company. This translates to a substantial loss of PKR 4.27 per litre, a staggering 71% of the prevailing OMC margin.

“Despite numerous correspondences submitted by various OMCs advocating for enhanced transparency in the exchange rate adjustment mechanism, regrettably, we find ourselves still devoid of clarity in this matter.”

The letter also pointed out the intricacies of state-owned oil company’s computation of exchange rate adjustments integrated into pricing elude our comprehension.

OMAP urges OGRA to facilitate a heightened level of transparency by elucidating the comprehensive methodology behind this process. Such elucidation would empower OMCs to effectively navigate these dynamics autonomously.

OMAP also requests chairman OGRA to evolve a reimbursement mechanism for premiums, akin to the established practice in the case of HSD premiums.

Copyright Business Recorder, 2023

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