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Monday, January 28, 2008

Bravo Farrukh Saleem for asking the questions - but do not expect answers gushing forth

Here's how 169 million consumers are being ripped off:

One, no refinery in Pakistan is technically capable of producing 0.5 per cent sulphur diesel (emission control standards in Europe and North America now require refineries to produce ultra low sulphur diesel). All that our refineries produce is 1 per cent sulphur diesel. In essence, Pakistani consumers are being supplied an inferior quality product at the price of a superior product. The average differential in price--between 0.5 per cent sulphur diesel and 1 per cent sulphur diesel--is $18 per ton. Pakistani consumers are being ripped off a hefty Rs4 billion a year. Two, in November 1999, the freight component on a litre of diesel fuel stood at Rs0.65. In December 2004, 'Inland Freight' on HOBC amounted to a scandalous Rs12.24 a litre. Someone is making truckloads of money because transporting a litre of gasoline should not be costing more than Rs0.30.

Three, in July 2002, the government of Pakistan allowed refineries to impose a 5 to 10 per cent 'deemed duty' in order to create a special reserve for the purpose of upgrading. The refineries have sucked up Rs18 billion from Pakistani consumers but not a rupee has been spent on up-gradation.

Four, since 2001, the government of Pakistan has been collecting an average of Rs40 billion to Rs50 billion a year in the form of 'Petroleum Development Levy' to be used for the stabilization of prices in future years. That reserve should have crossed Rs200 billion (the levy was ended in 2005). Can anyone please tell me where that reserve is?

Five, refining margins charged by Pakistani refineries are, in some cases, twice as high as being charged by refineries outside Pakistan. The cartel has served its members well. Look at who is making millions if not billions: PARCO made Rs1.2 billion in 2000-01 and now makes in excess of Rs10 billion. NRL has gone from a meagre Rs23 million in 2000-01 to Rs4 billion. ARL has gone from making Rs29 million in 2000-01 to Rs1.7 billion.

Yes, Pakistan's oil cartel is now demanding from the government a colossal Rs49 billion as 'Price Differential Claim'. Yes, Pakistani consumers would have to pay more because the international price has gone up. But, governments around the world support consumers, not cartels. We are special. Governments around the world break cartels. We are special.


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