ECC sets up a body to hedge petroleum prices

By Staff Reporter
Thursday – June 4, 2020
ISLAMABAD: The economic coordination committee (ECC), of the cabinet on Wednesday, set up a body headed by special assistant to prime minister (SAPM) for petroleum (SAPM-P) Nadeem Babar to explore various call options for hedging prices for the petroleum products imported by Pakistan.

According to an official statement, the ECC meeting chaired by the adviser to the prime minister on finance and revenue (A-PM-FR) Abdul Hafeez Shaikh also gave go-ahead to a “full and final” human resource rationalisation plan for the Pakistan steel mills (PSM) employees in accordance with the judgements and observations of the Supreme Court (SC) and other courts hearing the cases involving the PSM.

The ECC took up the proposal prepared by the energy ministry in consultation with various international institutions and local partners for hedging prices for petroleum products being imported and decided to set up a committee headed by SAPM-P Babar and including representation from the state bank of Pakistan (SBP), Pakistan State Oil (PSO), finance division, petroleum division, law division and planning division to explore call option for 15 million barrels of oil for one or two years divided in 12 equal monthly amounts for different stock price above current Brent as long as fee is within acceptable range.

Under the terms of reference (TOR) which can be readjusted by the committee in the light of future developments, PSO will act as the counter-party while the finance ministry shall give a guarantee of performance by the PSO.

The oil and gas regulatory authority (OGRA) will also be given the policy direction to include the monthly price of the option in the cost of liquefied natural gas (LNG) or any other oil product chosen in announcing the monthly prices.

The ECC also discussed the reported shortage of petrol in some cities and asked the energy ministry, competition commission of Pakistan and the OGRA to ensure the requisite stocks were maintained by the oil marketing companies (OMCs) and the supply to the fuel stations across the country was regular and intact throughout the month.

ECC chairman while taking a stern view of the reported petrol shortage directed all the relevant government ministries/departments to immediately inform him if situation worsens any further.