Ogra urged to conduct probe: OCAC concerned at discounted sale of imported oil by OMC

ISLAMABAD: The Oil Companies Advisory Council (OCAC) has expressed its concern over the sale of imported oil at a discounted rate in the market by one of the OMCs, seeking a proper probe by the Oil and Gas Regulatory Authority (Ogra) to protect legitimate businesses and industry.

In a fresh letter to Ogra Chairman Mansoor Khan, Chairman OCAC, has referred to the letter written by refineries on June 13, 2024, and the deliberations held in the product review meetings for June, July, and August 2024 regarding the unjustified additional HSD imports in the country.

The OCAC has claimed that the unjustified HSD imports by an OMC which started at 15,000 MTs per month have alarmingly increased to 40,000 MTs per month and the product influx is being distributed in the market by employing unfair practices.

OCAC urges govt to dismantle smuggling network

According to the letter, despite opposition from local oil refineries carrying surplus product and renting additional storage, OGRA continues to approve additional HSD imports by the private OMC without acknowledging the true demand of the country which is already deeply impacted by the cross-border movement. The capital injection and investment coming into an Oil Marketing Company should not be done at the cost of local industry by allowing unnecessary imports on one pretext or the other. It not only contradicts the established practice of prioritizing upliftment from refineries, but also places additional pressure on Pakistan’s foreign exchange reserves.

“The private oil marketing company has been offering oil at a discount of around Rs. 10 per litre, a figure exceeding the OMCs’ margin of Rs. 7.87 per litre. This hefty discounting is not only eroding the legitimate market share of other companies but is also leading to the illegal dumping of the company’s product at other companies’ stations through the lure of hefty discounts. It should be noted that these discounts have not translated into lower prices for consumers at petrol stations and cannot be considered a public benefit,” said OCAC.

The Council argued that given these circumstances, it is imperative that Ogra thoroughly investigates how any private company can offer such substantial discounts beyond its margins.

The OCAC has also claimed that there are reports suggesting an influx of smuggled petroleum products into Pakistan, raising the possibility that these discounts may be connected to such smuggled products.

“Although the ultimate responsibility and authority to grant approval for imports rests with OGRA, a fact which industry is reminded of time and again in Product Review Meetings, we urge OGRA to ensure survival of the local oil industry in the national interest. Any OMC refusing to uplift product from refineries and imposing unreasonable commercial terms should not be accommodated through additional imports,” the OCAC said, adding that PSO cancelled around 450,000 HSD imports since January 2024 to support refineries in highly depressing demand regime.

The OCAC has demanded that going forward, no non-KPC imports should be allowed and any OMC requesting to import HSD should be directed to coordinate with the refineries and uplift the product from them, especially if their upliftment commitments from the past many months have not been honored. “The blatant disregard for the actual demand within the country undermines the local industry resulting in abovementioned unfair practices and prioritizing unjustified imports over refinery upliftment exerts undue pressure on Pakistan’s foreign exchange reserves,” said Chairman OCAC, in his letter, adding that the oil industry, including the refineries, express deep concern and dissatisfaction over the current situation, which fosters unfair competition and negatively impacts the industry.

“We express our serious concerns and strongly urge Ogra to investigate this matter diligently and take necessary actions to protect the legitimate businesses and industry and resolve this critical issue without delay,” the OCAC added.

Copyright Business Recorder, 2024