Neglect, incompetence, greed bring fuel shortages

ISLAMABAD: The Ministry of Petroleum and National Resources has managed to develop this hopeless air of neglect all around it. In May 2014, The News sent out a warning that the “Pakistan State Oil (PSO) has already defaulted on its payments to banks for international suppliers while another Rs93 billion are to be paid shortly”. On June 13, the headline was: “Oil purchase: Default looms as PSO has to pay Rs93 billion by next week”. In August, the headline was: “PSO face threat of default again”. In August, the headline was: “PSO’s receivables touch historic peak”. On December 31, Reuters reported that “Pakistan’s PSO skips January fuel oil imports for first time”.
The Ministry of Petroleum and National Resources must now be held accountable for its perpetual neglect of a whole series of warnings.
After the ministry’s neglect comes PSO’s incompetence. The PSO has managed to default on Rs110 billion worth of Letters of Credit (LCs) to foreign suppliers. Banks including Citibank, NIB, Samba and Habib Metropolitan have now refused to do LC business with the PSO. Standard Chartered Singapore has already threatened to take the PSO to the International Court. The PSO has managed to exhaust its domestic overdraft limit of Rs284 billion. Banks including MCB, NBP, HBL and UBL are not willing to extend further credit.
In December 2014, the PSO paid bank penalties in the amount of Rs250 million. Over the past few months, the PSO has paid $8 million in demurrages and damages to suppliers. Total liabilities have gone up from Rs132 billion in 2009 to Rs293 billion in 2014.
Negligence plus incompetence plus greed is equal to fuel shortages. Oil Marketing Companies (OMCs) are still being overpaid in the billions. Refineries are still overcharging in the billions. Price Differential Claim (PDC) payments are still being made without audit certificates. And all the above commissions and omissions add up to more than Rs400 billion every year or Rs1.1 billion every day or nearly Rs50 million every hour of the year.
The PSO is a company that sells products worth Rs1.5 trillion. It’s is a company whose financial statements show a profit of Rs42 billion. It’s is a company whose financial statements show shareholders’ equity of Rs78 billion. And, the PSO is also a company that has trouble paying salaries to its employees. And, the PSO is also a company that is now unable to open up LCs.
Our petrol supply chain begins with the opening up of a LC for import of petrol. From the opening up of the LC to petrol actually reaching the pump takes about 45 days. To be certain, our petrol supply chain has been broken.
Ministry of Petroleum’s negligence, PSO’s incompetence and public-money-private-greed have all brought us to this juncture. I read somewhere that “greedy eaters dig their graves with their teeth”.