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Friday March 29, 2024

No one to be punished for petroleum crisis

ISLAMABAD: The high-level meetings proved to be simply eyewash and no action against any oil marketing company has been taken for not maintaining the mandatory 20-day reserves.Though the PML-N government is now admitting its worst failure to preempt the huge increase in demand of petrol following the closure of CNG

By our correspondents
January 20, 2015
ISLAMABAD: The high-level meetings proved to be simply eyewash and no action against any oil marketing company has been taken for not maintaining the mandatory 20-day reserves.
Though the PML-N government is now admitting its worst failure to preempt the huge increase in demand of petrol following the closure of CNG and the decrease in fuel prices, officials believe that despite this failure if the relevant rules and regulations were followed by oil marketing companies and government officials had monitored the whole cycle honestly, the crisis could have been averted.
Ministry officials are now sure that the situation will improve by this weekend but there is an effort to brush everything under the carpet so no powerful entity can be punished for the criminal negligence that caused great panic across the country.
Under Petroleum Ministry regulations and licence conditions of the oil marketing companies, these companies are bound to maintain reserves of at least 20 days keeping in view their estimated sales. These companies maintain huge reserves when there is an increasing trend in oil prices and they can earn huge profits. These companies often close sales during the last days of the pricing cycle expecting an increase in oil prices in order to make more hefty profits while the Petroleum Ministry, OGRA and local government officials who are responsible to monitor such a situation remain conveniently silent.
However, whenever there is a decreasing trend in oil prices, these companies avoid maintaining the mandatory 20-day reserves to avoid losses as they have to purchase oil at a high price knowing the selling price will decrease in the coming days. They are bound to bear these losses as they have been making big profits when there was an increasing trend in prices.
The government is supposed to oversee and monitor the whole operation of the import of oil, refining, oil marketing companies, distribution etc.
Most of the operations are regulated through Ogra which is bound to follow the government’s policy. Under its law, Ogra should be an independent body but it is not the case and ministry directly controls all major issues of the regulatory body. The ministry has almost daily-based data of reserves available with different companies and entities. If any company is not maintaining such reserves, Ogra can either cancel its licence or can impose a heavy fine on it. If Ogra is not doing this, it is the basic duty of the federal ministry to ensure that such penalty is imposed on the company violating rules, regulations and licence conditions. It is never done as oil mafia is very strong.
According to insiders of the Petroleum Ministry, despite the unexpected increase in the demand of petrol due to the closure of CNG and cheaper oil prices, there would have been no crisis if all oil marketing companies had maintained the minimum 20-day reserves which was mandatory for them. There were no reserves as there was a clear tendency of decrease in prices. Concerned ministry officials were aware of the possible shortage and top bosses also knew that companies are not maintaining reserves but no one ever dared take action against the powerful oil mafia.
Under Condition-7 of the criteria for award of an oil marketing company’s licence, an investment plan should concentrate on development of depots, installation etc and must create minimum storage of 20 days of their proposed sales.
While talking to The News, Shahid Khaqan Abbasi simply said, “Now we have asked representatives of all oil marketing companies to maintain reserves for the future”.
Asked why they were not maintaining reserves this month and why no action is being taken against them for this criminal violation of law and rules, Abbasi said taking action is the duty of Ogra, not his ministry. He was told it is the duty of his ministry to oversee the functioning of Ogra which is bound to strictly follow the government’s policy and if Ogra is not punishing the powerful oil mafia, the government should intervene to ensure severe punishment so such criminal violations are not repeated in the future. The federal minister added, “OK, we will ask Ogra to take action.” Abbasi added, “I hope that the oil marketing companies will maintain reserves now.”
Talking to The News on January 13, Abbasi had admitted a supply-side problem, saying there were logistic issues with the Pakistan State Oil (PSO), the largest supplier of fuel in the country in the northern Punjab. Maybe the shortage at PSO pumps diverted pressure to other filling stations, drying up their stock of petrol, he had added. However, he had said the issue has been resolved and it is expected that deliveries of fuel will start improving on Wednesday (January 14). It’s January 20 today.