Sources told Business Recorder that the Economic Co-ordination Committee (ECC) of the Cabinet, while considering a summary on ''Monitoring of Furnace Oil Prices'' by Ogra, in a meeting held on January 12, directed Ogra and Petroleum Ministry to jointly work out a mechanism to regulate and monitor the furnace oil prices. Ogra Chairman was directed to hold a meeting with Petroleum Ministry in this regard. Sources said that Ogra officials said that furnace oil product was de-regulated and, therefore, it could not monitor its price legally.
Sources said that during the meeting of ECC, it was suggested that before making Ogra responsible for monitoring and regulating price of furnace oil, it should be notified as a regulated item under Petroleum Products Development Surcharge Rules, 1961 as is being done in case of other petroleum products regulated by Ogra. In the guidelines submitted to ECC for monitoring furnace oil price by Ogra, Petroleum Ministry had proposed that: (i) import price of furnace oil will be at actual; (ii) the oil marketing companies'' (OMCs) margin will be 4 percent of ex-refinery/import price; (iii) furnace oil supplies/price of Hubco/IPPs will be as per their fuel supply agreements; and (iv) the existing import parity pricing mechanism for local refineries to calculate ex-refinery price of furnace oil will be maintained.
Keeping in view the two different sources of furnace oil supply - local and imports - Petroleum Ministry had proposed to ECC that Ogra should monitor furnace oil price. It was highlighted by the power producing companies in 2008 that the OMCs were charging high price of furnace oil which resulted in an increase in the cost of power production. It was, therefore, desired that price of furnace oil should be monitored by Ogra.
It was considered appropriate to empower Ogra to determine the furnace oil price when oil prices in the international market had risen to unprecedented levels during 2008-09. "But the proposal was deferred due to subsequent reduction of global oil prices and empowering Ogra to monitor the furnace oil price was then considered," sources added.
Petroleum Ministry had submitted a report on the profit and loss of oil refineries to ECC as it had sought the report prior to giving approval to empower Ogra to monitor furnace oil price. According to a report submitted to ECC, oil refineries had earned profit amounting to Rs 60.364 billion during last ten years from 1998-2008. Pak Arab Refinery (Parco) profit stood at Rs 40.218 billion; National Refinery (NRL) Rs 7.397 billion; Pakistan Refinery Rs 7.221 billion; and Attock Refinery profit was estimated at Rs 5.205 billion.