PSO seeks more autonomy to compete with foreign entities

ISLAMABAD: The Pakistan State Oil (PSO) has asked the federal government for more autonomy to effectively compete with its international competitors that have entered the Pakistan POL market.

The request is based on the decision of its board of directors seeking independence from the PPRA rules and delegation of more power to ensure a level playing field for quick and timely decisions to maintain its share in the market.

A letter to the secretary petroleum states that the PSO is the only public sector oil marketing company (OMC) mandated with strategically maintaining the energy supply chain of Pakistan in a highly competitive market and is facing a watershed moment upon the entry of international players with an advantageous environment to the detriment of the PSO.

The public procurement laws and bonded warehouses policy restricts the PSO, while the foreign OMCs get the additional advantage. By law, the PSO is obliged to disclose its purchase price and the suppliers must participate through a tender process, knowing that the price remains valid for several weeks. No distress cargo can be bought even at very favourable pricing due to over-regulated regime only applicable to the PSO.

Continuance of such obligations for the PSO raises severe concerns with respect to profitability, long-term business strategy and sustainability. In order for PSO to become financially sustainable in the long-term, certain measures are urgently and critically required to be undertaken by the federal government to level the playing field and promote a healthy competition.

The PSO is under the control of the federal government through the Marketing of Petroleum Products (Federal Control) Act, 1974 and was also brought under the umbrella of State-Owned Enterprises (Governance and Operations) Act, 2023 (“SOE Act”).

The PSO under the PPRA regime is exposed to high financial risks and instability, which obligates it to notify or mention oil prices on its website as well as on PPRA website due to which all other OMCs get advantage by negotiating greater discounts to undercut PSO in the market.

In view of the foregoing and being a strategic national asset, it is imperative that the federal government issue a notification delegating its powers, functions and shareholding to the BOM (board of management). In such a scenario while the PSO will still be controlled by the federal government through the BOM, the BOM while operating as an autonomous body shall function more effectively, thus making the PSO more progressive and competitive in all aspects. The BOM, chairman and MD will continue to be appointed by the federal government and all policies and directions will be strictly followed through the BOM.