Major refineries in private sector reject new pricing formula

Top officials of Attock Oil Refinery (ARL), Bosicor, National Refinery Limited (NRL) and Pakistan Refinery Limited (PRL) met in Islamabad on Friday to discuss the new refinery pricing formula.

In a joint letter to Prime Minister Syed Yousaf Raza Gillani, they urged him to review the decision.

The heads of four refineries said that the review could allow refineries operate on a sustainable basis and avoid any potential crisis in the oil and energy sector.

The review should also ensure continued supplies of petroleum products to the domestic consumers including strategic supplies to defence agencies, power sector support to local refining industry and save precious foreign exchange in case these products are imported instead of local supplies.

Refinery sources said that M Adil Khattak, Chief Executive Officer of ARL, Wasi Khan, Managing Director of Bosicor, Shoaib Anwer Malik, Chief Executive Officer of NRL, and Ejaz Ali Khan, Managing Director of PRL attended the joint meeting. They said four refineries would suffer an annual loss of over Rs4 billion on the basis of prevailing prices as a consequence of the revision in the pricing formula for refineries.

The refiners would suffer further loss of Rs3 billion on account of reduction in customs duties on HSD from 10 per cent to 7.5 per cent. These losses would render the operations of refineries economically unsustainable. Moreover, it would not be possible to implement any product improvement projects, they said.

The heads of refineries in their joint letter said these refineries are strategic assets providing 11 million tonnes out of the 19 million tonnes of petroleum product requirements of the country. They also ensured uninterrupted petroleum product availability for domestic and defence needs.

They further said the proposals being considered, as reported in the media, were not in line with the understanding developed to arrive at a consensus.

The petrol pricing formula is very disturbing since it causes the price of petrol produced by the refineries to fall to 93 per cent of naptha which is the raw material for producing the product, contrary to all economic logic.

In this hour of crisis due to the unprecedented rise in international oil prices, the private sector refineries, being responsible corporate citizens, recognise that the country was passing through a difficult phase and they want to share the burden with the government, says a Press communique issued after the meeting.