After petrol, govt plans to introduce higher grade of diesel

ISLAMABAD: The government has decided to introduce better quality of High Speed Diesel (HSD) under the deregulated regime of oil marketing companies (OMCs) and dealer margins, which will improve efficiency of vehicles’ engines. At present, low quality HSD is being used in Pakistan, whereas other countries have moved on to Euro3, 4, and 5. Earlier, the government introduced Research Octane Number (RON) 92 for petrol, replacing the earlier RON 87.

RON87 had been abandoned by a majority of the countries and is currently only being used by Somalia.

Oil, gas: Exploration and production sector has seen $10b investment, says Abbasi Now, the Pakistan government has also planned to introduce higher grades of diesel in the country. Sources said that the government was in process of introducing alternative grades of HSD – Euro 3, 4 and 5 under the deregulated regime. They said that the Ministry of Petroleum had drafted a summary to be tabled before the Economic Coordination Committee (ECC) for approval. The ministry had moved a summary to different concerned ministries, and the regulator – Oil and Gas Regulatory Authority (Ogra) – to seek comments before moving to the economic decision-making body for approval.

Officials said that the petroleum ministry wanted to introduce regime of deregulating margins of OMCs and dealers before introducing alternative grade of high speed diesel. At present, Ogra says that reasonableness of the margins is being determined by the federal government. It argued that leaving the determination of margins on oil companies will lead to the top six firms – with a market share of 87.9% – creating a cartel due to lack of competition and alternative choice of fuel.

Petroleum product prices likely to fall Similarly, the regulator said that retail dealers’ associations would create a monopoly situation and consumers will be at their mercy. The petroleum ministry is of the view that under a regulated regime, margins are fixed, therefore good or bad performers are equally benefitted. On the other hand, under a deregulated environment, the OMCs have to capture the market by offering a reasonable price and efficient quality. So, a good performer would definitely be in a winning position.

Consequently, market forces may discourage sale at higher price, restrict cartelisation and OMCs and dealers would have to improve position before the general consumers. Regarding the alternative of HSD, the petroleum ministry said that the government is already in the process of introducing alternative grades under the deregulated regime for which a draft summary for ECC has already been circulated to concerned ministries and stakeholders for comments. It further said that prices would be determined under market competition whereby bulk buyers may adversely influence market cartelisation.