MUSHTAQ GHUMMAN

ISLAMABAD: Economic Coordination Committee (ECC) of the Cabinet has allowed Oil Marketing Companies (OMCs) to import 92 Research Octane Number (RON) Premium Motor Gasoline (PMG) (petrol) under the existing regulated environment.

Presided over by the Finance Minister, Senator Ishaq Dar, the ECC in its meeting on August 18 2016 also disallowed import of PMG below 92 RON from next PSO import/ tender cycle.

Official documents available with Business Recorder reveal that the Ministry of Petroleum & Natural Resources informed the ECC that Pakistan needs to improve both quality and standards of its petroleum products produced by local refineries and imported by OMCs.

Petroleum Ministry argued that keeping in view the lower prices of petroleum products in international market, it is the optimal time now for switching over from current 87 RON Premium Motor Gasoline (PMG) to higher grade 92 RON PMG which is also being marketed in most of the countries in the world at present. It would help in reducing environmental impact due to lower emissions and better engine hygiene, while simultaneously providing an enhanced motor vehicle experience to the customer. Moreover, current automobiles are designed to operate at 92 RON or higher RON PMG.

The price differential between 87 RON PMG and 92 RON PMG is around Rs 2.74/litre. However, actual import cost as well as the price differential may vary from time to time in accordance with the price trends in international market.

Ministry Petroleum & Natural Resources further revealed that since local refineries are not capable of producing 92 RON PMG, which requires a substantial investment to acquire compatible technology, therefore, various options were considered in order to improve the quality of locally produced PMG. After thorough consideration, consensus has been developed with the local oil industry i.e. Oil Marketing Companies and Refineries for introduction of 92 RON PMG, as main grade fuel in the country.

Ministry of Petroleum and Natural Resources submitted the following proposals for switching over from existing 87 RON PMG to 92 RON PMG, for the consideration of the ECC: (i) OMCs may be allowed to import minimum 92 RON PMG under the existing regulated environment. Import of PMG below 92 RON will not be allowed; (ii) refineries would produce 90 RON PMG except Attock Refinery, which may continue producing the current 87 RON PMG till a solution is found that reduces/eliminates their surplus naphtha production; (iii) OMCs would receive 87/90 RON PMG from refineries, as per existing procurement mechanism. Co-mingling/blending of imported and locally produced grade by refineries and OMCs would be allowed, as it will improve the specification of the retail product to around 90-92 RON PMG; (iv) there would be no obligation on refineries to blend product prior to marketing in order to bring the specification of 92 RON. However, if any refinery/OMC decides to produce 92 RON PMG by blending with higher octane (95/97 RON) product, it may be allowed to the extent of requirement finalized in the monthly Product Review Meetings. A policy change may be made to allow refineries to also import higher octane products (95/97 RON) in the Import Policy Order through a notification by Ministry of Commerce; (v) pricing formula for imported 92 RON PMG will be based on 5 days average (as per international practice) Mean of Platts Singapore (MOPS) quotations centered on B/L date plus tender premium/freight and incidental charges on actual basis; (vi) pricing of imported 92 RON would be on the basis of PSO’s actual landed import price. Other OMCs/Refineries would also price their PMG 92 RON product on the basis of PSO’s actual landed import price, as per current practice. In case the PMG 92 RON FOB prices commence to be published/quoted in Arab Gulf Market, the same would be applicable instead of MOPS FOB price; (vii) the pricing/import of 9.7 RON PMG (HOBC) shall be fully deregulated for all refineries and OMCs; (viii) pricing benchmark/mechanism for local refineries for producing 90/87 RON PMG will be based on PSO’s actual landed import price of 92 RON PMG minus ocean losses and a RON penalty factor to be derived; (ix) the local refineries that produce 92 RON either directly or through blending may get its full price on PSO’s actual landed import price basis less ocean losses; (x) the taxes/levies and other cost elements will be applicable on different PMGs imported for sale purposes as announced by the Government and the Regulator (OGRA) from time to time; (xi) necessary provisions for incorporation of 90, 92, 95 & 97 RON PMG and respective Rules will be made accordingly; and (xii) OGRA shall monitor the selling price of 92 RON PMG, as being done for current 87 RON PMG.

During ensuing discussion, the Minister for Petroleum and Natural Resources informed the meeting that RON 92 PMG was more refined and efficient with lower carbon emissions as compared to current RON 87 PMG. He further stated that switching to RON 92 was being carried out keeping in view the prevailing international trend. RON 92 was environment friendly and would give better mileage to its consumers. He stated that usage of RON 87 had been abandoned in most parts of the world. Now, it only being used in Pakistan and Somalia. It was suggested that import of PMG below RON 92 should not be allowed from next PSO import tender cycle. It was also proposed that two years may be given to Attock Refinery to make necessary arrangements for production of RON 92.

After a detailed discussion, the ECC in its the summary took the following decisions: (i) allowed OMCs to import minimum 92 RON PMG under the existing regulated environment. Import of PMG below 92 RON will not be allowed from next PSO import/tender cycle; (ii) refineries would produce 90 RON PMG except Attock Refinery, which may continue producing the current 87 RON PMG till a solution is found that reduces/ eliminates their surplus naphtha production, but not later than two years from the date of implementation of the decision; (iii) the pricing/import of 95/97 RON PMG (HOBC) shall be fully deregulated for all refineries and OMCs; and (iv) OGRA will monitor the selling price of 92 RON PMG, as being done for current 87 RON PMG, which is being discontinued from next PSO tender/import cycle.