KARACHI: Oil and Gas Regulatory Authority (OGRA) has assured the oil sector it would review the exchange rate adjustment mechanism after the oil sector identified serious flaws in it.
OGRA held the meeting with the oil industry on Tuesday to discuss the mechanism of exchange rate adjustment. Representatives of the Oil Companies Advisory Council (OCAC), Oil Marketing Association of Pakistan (OMAP), CEOs and CFOs of Oil Marketing Companies (OMCs) attended the meeting.
Sources told The News that the industry pointed out, barring PSO (being the bench marked company), an existential threat, which was mainly driven by the lack of a coherent policy and lack of understanding and interest on part of the regulator to protect the interest of all the stakeholders.
The representatives of the industry pointed out that in a regulated environment, it is the duty of the regulator to ensure that the respective industry gets a level playing field. They pointed out serious flaws in the current mechanism that envisioned a formula through which the actual forex losses could be recovered and disbursed. Instead, the industry pointed out serious leakages, whereby the existing formula was allowing forex recovery to companies that did not even import any cargos. Almost all top companies, including multinational players pointed out the serious flaws in the formula and demanded from the forum to fix the formula ensuring a level playing field for all the players at large.
One of the participants suggested to create a pool for exchange losses recovery and disbursement whereby the actual losses would be reimbursed to the industry. The proposed pool system would ensure an air tight system with zero leakage. They said the pool would ensure that nobody intentionally or unintentionally takes any undue advantage.
Representatives of the OMCs also registered a serious concern that besides clear cut instructions given by the Minister of State on Petroleum, the regulator failed to initiate OMCs margins review, negative IFEM, and stock holding cost. They said that the regulator had only focused on negating the demands of the industry on exchange losses.
OMAP representative pointed out that the refusal of the regulator on creating a level playing field was not just causing huge losses to the OMCs, but was an existential threat.
The regulator’s current role is also seriously closing the doors for new foreign direct investment in the sector, which is an added failure of the current political system and in conflict of what the ministry has been saying, they pointed out. These things were also impacting the confidence of investors, and the ability of the sector to maintain strategic reserves, the OMAP representative said.