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September 14, 2018

PSO pays Rs8.45b as demurrages in five years


September 14, 2018

ISLAMABAD: In an alarming disclosure, Pakistan State Oil (PSO) has paid $68.7 million (Rs8.45 billion) in the last five years as fine in the shape of demurrages for delayed offloading of the POL products from vessels in ports.

Since the damages paid in the form of demurrages from the profitability of the company, so this amount is not reflected in the consumers’ price. However, the government being the largest shareholder naturally braves the loss in profitability.

This has been disclosed by the top management of the PSO here on Thursday in Senate Committee on Petroleum Products. The acting Managing Director Jehangir Ali Shah told the forum that in just last financial year 2017-18, the state owned entity paid $20.4 million (Rs2.5 billion) in the shape of demurrages while the whole industry consisting of private oil marketing companies also paid $30 million as demurrages. He said that infrastructure constraints on ports are the main reasons for the demurrages.

The documents he shared with the senators are really revealing showing the appalling situation as in 2016-17, the PSO has paid the biggest amount of $25.3 million. Committee Chairman Senator Mohsan Aziz came down heavily on PSO management arguing that it is sheer inefficiency of the entity as the main shareholder in the company is the government and if its profit is injured on account of heavy amount paid in the head of the demurrages, it also hits the profitability of the government. “So it is not tolerable,” he said.

Mr Mohsan also lambasted PSO saying the demurrages in last five years have increased to 0.62 percent in 2017-18 from 0.03 percent in 2013-14.

Jehangir Ali Shah told that as many as 22 oil companies are licensed, out of these as many as 17 are active and the new oil marketing companies have not developed their storage facilities and they import their products in small vessels of 20000-25000 tones whereas PSO imports high speed diesel, motor gasoline, furnace oil in huge vessels of 70,000 tones in Karachi port, Port Qasim and Keamari Port. The small vessels create problems as they also take many days to offload the products. He mentioned that PSO is developing storage of 90,000 million metric tons at Keamari and also in process of laying down the pipeline from Keamri to Port Qasim from where the HSD and MOGAS are transported to the starting point of white oil pipeline that goes up to Kot Addu. In addition, PSO is also in process of developing the additional storage of 2,70,000 million metric ton. He also said that all over the country PSO has storage of one million ton of POL products and the 2,70,000 ton storage will be in addition to that.

DG Oil Muhammad Azam said that in Karachi Port Trust (KPT), there are 3 piers and petroleum division is asking the port authorities to dedicate 2 piers to ensure smooth offloading of POL products to avoid the demurrages.

In the meeting, Senator Quratul Ain Mari raised a valid question asking if small companies do not clear the backlog of their product in the white oil pipeline on time and if they are also involved in causing more delays in offloading their products on ports, they should be exposed to the demurrages why the PSO. The senate body proposed if the small and large OMCs jointly import their products in large vessels, it will help reduce the congestion in the ports.

Senator Quratul Ain Mari posed another question after listening to acting PSO MD as to why Ogra has issued the licences to the new oil marketing companies which have not developed the storage. Ogra Chairperson Uzma Adil responded saying that oil marketing companies are first given 3-year licence for construction of storage and after validation by third party, they are allowed to operate and it is mandatory on every OMC to have storage of their products for 20 days. On this particular issue, the forum suggested the authorities concerned to ensure the up-gradation of the storages in size by every oil marketing company as per the volume of the imported products.

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