Saturday May 18, 2024

OMAP says unfair policies, smuggling push small oil firms to edge

By Our Correspondent
May 07, 2024
Oil tankers park in a terminal near a port in the Pakistani city of Karachi. — AFP/File
Oil tankers park in a terminal near a port in the Pakistani city of Karachi. — AFP/File

KARACHI: The emerging oil marketing companies are facing an existential crisis due to unfair policies and unchecked smuggling, the Oil Marketing Association of Pakistan (OMAP) warned on Monday.

In a letter to the Prime Minister Shehbaz Sharif, the Oil Marketing Association of Pakistan (OMAP) said that "emerging OMCs are now confronting existential threats due to policies that do not account for their operational realities".

"Issues such as the unchecked smuggling of Iranian diesel are causing not only competitive disadvantages but also significant revenue losses to the national exchequer. Furthermore, the foreign exchange loss adjustment mechanism and the outdated OMC margin structures are exacerbating the financial strains on these companies, thereby questioning their very survival."

The oil body also questioned the role of the Oil and Gas Regulatory Authority’s (OGRA) current operational focus. "It is distressing to observe that OGRA’s advocacy of certain present policies predominantly favors the few Oil Marketing Companies (OMCs) which control a major share of the market," the letter read. "This bias not only stifles competition but also places emerging OMCs, who have heavily invested in expanding Pakistan's strategic oil reserves, at a severe disadvantage. OGRA is completely ignoring this and paying no attention to providing a fair and level playing field to emerging OMCs."

It noted that what is most concerning is OGRA’s push towards the deregulation of petroleum product prices without comprehensive stakeholder engagement or consideration of the broader impacts on the economy and employment. "Such a move, if pursued without due diligence and inclusive planning, could potentially destabilize the sector and lead to job losses, affecting countless Pakistani families."

In light of these issues, it is imperative that OGRA adopts a more inclusive and balanced approach, ensuring that all stakeholders, especially the emerging OMCs, are afforded a level playing field. Policies need to be reevaluated and aligned with the realities of all market participants to foster a truly competitive and robust petroleum sector, it added.

The OMAP sought a meeting with the PM to discuss these critical issues in detail. "Your intervention is crucial to prevent potential irreversible damage to a significant portion of the petroleum sector and to ensure that the sector can continue to contribute positively to Pakistan’s economy."