Fuel crisis inquiry report: Cabinet had approved cancellation of oil import

ISLAMABAD: The summary to cancel oil imports, which had led to an unprecedented fuel shortage crisis, had been approved by the federal cabinet, a government inquiry commission that probed the shortage of petroleum products in June this year noted in its just-released report.

“Interestingly, the summary [of the Ministry of Energy, Petroleum Division or MoEPD secretary] was approved by the cabinet two days after the issuance of a letter [order],” the findings said and pointed to the “questionable judgment of ban/cancellation of imports by the MoEPD”.

The report said a highly controversial order of the MoEPD was issued on March 25, 2020 addressed to the Oil Companies Advisory Council (OCAC) directing the Oil Marketing Companies (OMCs) to cancel their import orders immediately.

It said the order was issued on the basis of a summary moved by the MoEPD secretary that indicated that the downward trend in international prices had caused a glut in the local refineries.

The summary argued that imports should accordingly be “rationalised” (the words ban or embargo were not mentioned) to ensure local refineries kept working and to keep local oil wells wet. The report added that international price of petroleum products were still showing a steep downward trend, explaining the trend through graphs.

The report said that even a layman could figure that this so-called ban period overlapped with some of the lowest prices in recent history. Thus, it was against prudence to impose an embargo on imports at this juncture. Had the MoEPD acted with vigilance and ensured the lifting of stocks from local refineries through February/March 2020, the need for such a ban would not have arisen, it said.

The report further said it would have benefited the country tremendously in terms of foreign exchange had the OMCs been given extended quotas to import during this period. No argument can mitigate the ill-effects of this decision that partially led to the shortage of MS (petrol) in June 2020.

The report recommended the imposition of a penalty on the OMCs for the June crisis. The monetary losses forced upon government entity Pakistan State Oil (PSO) during the days of shortage must be equitably recovered from the OMCs which creamed off the unlawful profits through hoarding, slowing down or drying out their retail outlets.

“How can the cruel story of oil ship MT Ploutos go unpunished where the PSO ship was forced to discharge earlier by MoEPD by violating the priority-queue to delay the berthing of MT Ploutos,” the report said and pointed to “these easy-but-illegal gains by OMCs”.

It said that the OCAC has routinely changed berthing plans for unexplained reasons. Vessel MT Ploutos carrying MS for some OMCs was due to berth between June 16 and 18, 2020 after arriving on June 15. However, with the OCAC intervention, it berthed on June 29. This action avoided a loss to these private OMCs by a volume of 57,932MTs (78,729,588 liters) of MS. By the same token, the state-owned OMC, PSO, bore the burden of loss incurred during June 2020, it said.

The report recommended that all such unlawful gains be recovered from the OMCs by the federal government as those profits rightfully belonged to the general consumers at large.

The commission said that during its visit to Karachi, records of some private depots were analysed, which indicated that certain OMCs were involved in storing their products in depots in the month of June 2020 instead of supplying them to retail outlets. It named the transgressing OMCs. Clearly, the Oil and Gas Regulatory Authority (OGRA) and MoEPD acted as mere bystanders during this period of crisis, it said.

The report proposed that a monitoring cell be established in the MoEPD, which should collect all relevant data from OMCs (import, local uplifting, daily/monthly sales of OMCs, refinery import/production programme etc.). The cell would record the data of every aspect of OMCs just like OCAC. Only this data would have legal sanctity and the OMCs could also be held accountable in case of spurious figures.

Currently, it said, the OCAC has a total staff of 12 persons. The new cell may operate with twice that number but all data would be directly available to the MoEPD and the government where required. In this way, the OCAC, a non-statutory private body, would eventually be barred from its current decisive role in data collection, berthing priorities, Inland Freight Equalization Margin (IFEM) claims etc. These areas must ultimately be the exclusive domain of the MoEPD.