A presentation for the committee said that the refinery sector is on the verge of collapse and needed immediate support from the government to bail out the sector from continuous losses, sources told Dawn.
The committee has been formed by Supreme Court to suggest amendments to the existing oil pricing formula before Dec 24.
The committee is headed by the secretary of petroleum, and has five members from oil refineries besides secretaries of finance and industries.
‘The target of the committee is to seek fair distribution of profits at all levels in the oil sector and ensure that benefits are passed on to consumers also,’ said an official of the petroleum ministry.
He added that the oil products are prepared by the refineries and if prices are controlled at that level, better pricing would be available to consumers.
However, proposals presented by refineries said that oil refineries have been suffering losses for more than one year due to international and local conditions.
On its part refineries maintain that any changes in the pricing formula would not be beneficial for the oil sector and the consumers as long as the core issues are resolved.
‘Refineries in Pakistan are facing three key issues, inter-corporate circular debt, high interest rates and exchange rate loss,’ said a senior executive of an oil refinery.
He said that the government is unable to control these issues, which have increased the financial charges incurred on the refineries.
‘Besides the economic turmoil at global and national fronts resulted in depressed refining margin,’ he said.
The presentation said that PRL faced a loss after tax of Rs672 million. It said that the PRL suffered loss after tax of Rs1.39 billion in first quarter last year which included a loss of Rs453 million due to depletion in rupee against dollar.
While the National Refineries Limited (NRL) posted a loss of Rs157 million in July – September 2009 and its loss after tax in first quarter last year was Rs1.61 billion.
Similarly, the Attock Refinery and Bosicor Refinery continue to face losses. However, Parco has posted profits in the first quarter.
Talking to Dawn, officials of refining sector said that due to low margins and higher financial cost refineries operated at less than 80 per cent of their capacity during the last quarter.
If the situation continues, refineries would be forced to decrease production to avoid further losses, said a member of the refineries negotiating team.
However, sources in the petroleum ministry have acknowledged that oil pricing is a complex issue and needed a detailed evaluation.
The petroleum ministry official said that to woo refineries, the government is expected to increase deemed duty being given to refineries on diesel from 7.5 per cent to 10 per cent with a capping of $70 per barrels Arab light crude price.
‘The situation is complicated as the country would be forced to import fuel if refinery production declines and that will increase dollar outflows and add to weakness of economy,’ the official added.
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