Govt caps diesel refining margin at $30/barrel during market volatility

The government has moved to limit the refining margin on high-speed diesel (HSD) to $30 per barrel, down from $41, during volatile markets, according to The News as carried by Profit. The decision was taken at the committee's seventh meeting, chaired by Petroleum Minister Ali Pervaiz Malik, which left petrol pricing unchanged. Under wartime conditions, HSD's ex-refinery price will be set from actual crude import costs plus a refining allowance of up to $30 per barrel, benchmarked against Aramco Yanbu arrivals.

PSO, the only HSD importer, will recover any excess import premium at actual cost via the Inland Freight Equalisation Margin (IFEM). The 10% customs duty element will be dropped from the main ex-refinery pricing formula, with duty on actual imports repaid to PSO separately. Seven depots will leave the freight pool from 2027, though OGRA will still require marketers to keep physical stocks at those sites.

A windfall tax on marketers and refineries was also weighed, but the Federal Board of Revenue said talks were premature until refiners' audited accounts were final. Officials and KPMG will meet the FBR head to frame a principle-based approach for refinery windfall taxation. The committee unanimously rejected a cash-based Price Stabilisation Fund, citing risks to oil-sector liquidity and circular debt, and favoured strategic reserves or targeted subsidies for shocks.