The policies of oil pricing, refinery margins, distribution margins and deregulation of oil imports caused benefit of approximately $7-8 billion every year to the multinational and the national companies in the oil and gas sector during former President Genera Pervez Musharraf's rule.
The 2000-01 report of the Public Accounts Committee (PAC) laid before the National Assembly on Thursday revealed that during examination of accounts pertaining to the petroleum ministry, the committee observed that the oil marketing companies and refineries were manoeuvring oil prices to their advantage and unnecessary burden was being put on the ordinary citizens.
The Committee demanded the government to take notice of this cartel. Audit pointed out that according to law, development surcharge on petroleum procedure represent differential between production cost and the fixed sale price of refineries or differential between the average import price and the prescribed sale price of oil marketing companies.
The surcharge was meant for meeting refund claims subsequently on account of price differential and inland freight equalisation margin IFEM. In contravention of the above objectives of the petroleum surcharge, an amount of Rs 255 billion was credited to the Federal Consolidated Fund during the year 1988-89 to 2000-01, whereas the same was primarily meant for aforesaid specific purpose.
The department was asked to furnish authority under which development surcharge fund was transferred to the Federal Consolidated Fund and also to intimate volume of liability on account of pending refund as on June 30, 2001. The PAC desired a briefing by the PAO on the issue in its next meeting about the ministry.
However, the Committee was directed for resolution of the issue in consultation with finance division. A report was desired by the Committee within two months. The audit also pointed out unwarranted refund on accounts of profit shortfall of Rs 11,370.013 million, excess claim of refineries on accounts of profit shortfall due to non-inclusion of other income in the net return on paid up capital amounting Rs 154.562 million, excess refund due to application of incorrect 15 days average Arab Gulf plats rate and exchange rates Rs 1,211,836, inadmissible refund of development surcharge on accounts of inland freight margin Rs 987.650 million, non-realisation of gas development.
Audit pointed out that scrutiny of refund claims revealed that a sum of Rs 1,211,836 was overpaid during one fortnight only due to incorrect application of 15 days Arab Gulf Platt's (a magazine on oil products) rates of petroleum products and exchange rates for conversion of refineries as detailed below. M/o Petroleum failed to notify average spot Arab Gulf mean price for last 15 days as published in Platt's Oilgram on the 1st and 15th day of the each month as required.
This resulted in free hand to refineries for making exaggerated claims. The Principal Accounting Officer (PAO) informed the PAC that in fact, it is established practice of the State Bank of Pakistan that in the application of exchange rate, it is rounded up to two decimal in specific situation, however, some times refineries may be benefited due to upward rounding, on the other hand it is possible that refineries may suffer loss due to drop of two decimal places.
The department will explain the issue more in detail in its briefing. The Committee kept pending it decision on the para and asked the PAO to further elaborate it during his briefing to PAC in its next meeting on the Ministry.