ISLAMABAD: An inquiry commission has held secretary Petroleum Division, director general (Oil), section officer as well as chairpersons, and three members of the Oil and Gas Regulatory Authority (OGRA) responsible for the oil "crises" in June 2020, and recommended departmental and penal action against those behind the crises.
The commission also described OGRA as a white elephant "which was not more than a silent spectator before or during the crises of shortage of petroleum products." The Cabinet Division constituted an inquiry commission under Pakistan Commission of Inquiry Act, 2017, to investigate the shortage of petroleum products in the country, and matters related to incidental thereto on July 28, 2020. Abubakar Khudabakhsh, additional director general FIA, was the chairman of the eight-member committee.
The committee looked into the "real" causes for the shortage of petroleum products in the country in or about the month of June 2020, and identification of those responsible for this crises including the private sector as well as the public functionaries or a regulatory authority.
The "Report of the inquiry commission on shortages of petroleum products in Pakistan" reveals a number of factors which caused shortages of petroleum products in the country.
The inquiry report states, "Secretary Petroleum Division remained encapsulated in a vacuum, both prior to and during the crises period. No satisfactory explanation has been offered as to why the word rationalization, approved by Cabinet, was transformed into ban/cancellation of imports. Likewise, how would the flagrant violations of OMCs (Oil Marketing Companies) spread over a prolonged period, could be ignored by him. The commission also recommends departmental reprimand/action against the secretary Ministry of Energy, Petroleum Division".
The inquiry commission further recommends departmental/penal action against the incumbent Director General (Oil) for passing "flagrantly illegal" orders regarding allocation of import/local quotas.
The inquiry report highlights that the posting of incumbent as well as previous DGs Oil has been found against the "approved criteria".
The current DG Oil Dr Shafiur Rehman Afridi is a veterinary doctor by qualification, and its does not match with the given criteria. He is a grade-20 officer of OMC and with no previous experience related to the post of DG Oil. The DG Oil exercise his power to chair Product Review Meetings, where matters of import/lifting from refineries are discussed and quotas allocated. The DG oil also ensures minimum stock that each OMC is liable to keep.
However, he insisted that the Petroleum Rules 2016 shifted the power to OGRA. The commission recommends strong departmental action against Imran Ali Abro, and the other associates who has been maneuvering the unlawful affairs in the Petroleum Division.
"Imran Abro is reportedly the king pin in the Petroleum Division and calls the shots as behalf of his superiors. He is also the signee of the so-called ban letter (March 25, 2020) and serving in the ministry for the last six years without any legal ground," according to the report.
"Under the Rules of Business, a contract employee of private company (Inter state Gas Systems (Pvt) Ltd) cannot serve on deputation/attachment." Monetary losses forced upon Pakistan State Oil (PSO), a state entity during the days of shortage must be equitably recovered from the OMCs which creamed off the unlawful profits through hoarding, slowing down or dying out their retail outlets.
"How can the cruel story of oil ship 'Ploutus' go unpunished, where the PSO ship was forced to discharge earlier by the division by violating the priority queue to delay the berthing of 'Ploutus'. The commission recommends that all such unlawful gains be recovered from OMCs by the federal government as these profits rightfully belonged to the general consumers at large," the report states.
"The commission states that the OGRA has been taken up on top of the list as much of the mess that abounds in the oil industry pertains to OGRA and the related laws/ rules. Having been created in 2002 and given some powers to regulate oil industry in 2006. It took OGRA, a long 14 years to even formulate its rules.
"The regulator was never in a position to execute and enforce these rules and constantly shunned away from the very responsibility that had been bestowed upon OGRA through OGRA Ordinance 2002 and Oil Rules 2016.
"Catalogue of failures of OGRA since 2002 includes dishing out licenses (25 in last 14 years while 32 wait in line) to OMCs without ensuring actual enhancement of storage facilities, zero inspections of relative adherence to minimum stock requirements by OMCs, imposition of ritual fines on OMCs for drying out their retail outlets during the month of June 2020, issuance of unlawful provisional marketing licenses to OMCs, no punitive action on illegal joint ventures or hospitalities between OMCs, no revocation or suspension of license of even a single delinquent OMC, no mechanism to ensure lifting of local quota of petroleum products by OMCs, no checks on operations on unlawful private storage companies, and so on.
"Oil industry would have been better off had there been no OGRA. Such proliferation of licenses has upped the scale of malpractices including smuggling and adulteration.
"The commission is of the considered opinion that formation of a regulatory body like OGRA, perhaps in line with modern markets of developed countries, was not aligned with the ground realities of Pakistan. As such, the inquiry commission strongly recommends dissolution of OGRA through an Act of Parliament within next six months," the report states.
It also says: the commission recommends strict penal/departmental action against those involved in illegalities, especially in issuance of unlawful provisional marketing licenses/marketing permissions.
"This includes the chairpersons (incumbent and the previous ones) and their associated members (Oil, Gas, Finance) that constitutes the 'Authority' under Section 3 (3) of OGRA Ordinance 2002.
"To accurately assess the illegality on part of each person is a matter of further investigation/ probe." The OCAC has assumed a far more dominant position compared to even the government departments, despite the fact that it was not established by the federal government through any administrative order, act or ordinance. The OMCs are effectively bound to pay up huge amounts in OCAC membership fees in order for them to operate within the industry. Membership of OCAC is mandatory for participation in Product Review Meetings (PRMs), hence without its OMCs who may have the license of OGRA would not be able to get any local or import allocations," the report says.
"The OCAC acts as the brain behind decisions to be made in the PRM. Although OCAC claims to be just a participant in the PRM that is headed by the DG Oil and does not claim to have any direct stake, yet the minutes of the meeting are issued by it and signed by their representative instead of the DG Oil. The OCAC membership is required for claiming inland freight equalization margin (IFEM) adjustments. For claiming IFEM adjustments, inter company freight settlement (ICFS) agreement is signed under OGRA and OCAC membership has been surprisingly set as pre-requisite for signing this agreement," according to the report.
Copyright Business Recorder, 2020
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