9 Petroleum Companies Hoarded Petrol in June and Made Billions: Report

The five-member Inquiry Commission headed by Additional DG FIA Abubakar Khudabaksh was formed in July this year to probe into sudden petrol shortage in the country earlier this year in June.

The findings of the commission have revealed that a lack of coordination among the departments working under the Petroleum Division was one of the primary reasons for the shortage. The report, a copy of which is available with ProPakistani, has revealed that Oil Marketing Companies (OMCs) deliberately stopped supplying petroleum products to pumps despite having considerable stocks at their disposal.

The commission has submitted its report to Prime Minister Imran Khan, and will be presented before the federal cabinet on Tuesday (today). The commission has also recommended strict action against the secretary Petroleum Division, DG Oil, OGRA and private oil marketing companies (OMCs).

The report has revealed that OMCs made Rs. 6 billion to Rs. 8 billion during the June oil crisis and emphasized the period between June 1 and 26, in saying that “OMCs committed every illegality in business as usual manner”.

It wrote that the prices of MS [petrol] were substantially cut on May 31 and the new price was set at Rs. 74.52 per liter as a result of internationally plummeting prices. This would have caused OMCs to incur a substantial inventory loss with free sale in June, so they simply let the supplies to dry out slowly, against all legal and moral norms.

Additionally, the report has uncovered numerable other failures of OGRA since 2002, including but not limited to the issuance of licenses to OMCs without proper evaluation of actual storage facilities, failing to ensure minimum stock requirements, imposing ritual fines on OMCs, issuance of unlawful provisional marketing licenses to OMCs, lack of any punitive action on illegal joint ventures or joint workings between OMCs, as well as being unable to put any mechanism for keeping any checks on operations of unlawful private storage companies.

The committee has recommended, “Such proliferation of licenses has upped the scale of malpractices including smuggling and adulteration”. The Inquiry Commission strongly recommended the dissolution of OGRA through an act of parliament within the next six months.

The report writes, “All OMCs (other than the Pakistan State Oil and Shell) proportionally held on to their stocks with knowledge of anticipated rise in prices. This has been proven during a ground check of filling stations and records submitted by the OMCs with affidavits”. However, OMCs did show sales on paper during this time but ground checking of the filling stations showed that OMCs were short on supply.

The report added, “It is clear that all OMCs had a fairly good idea of a price increase of at least Rs. 20 per liter and thus illegally hoarded their stocks during the crisis, stripping the public at large of billions of rupees.”

PSO’s market share increased by approximately 48 percent in June because it didn’t get involved in the same illegal practices, which also led to a loss of approximately Rs. 8 billion. “Likewise, Shell, to some extent, also tried to keep pace with the situation and fared much better than other OMCs. Shell also posted a loss of more than Rs. 8 billion in the first two quarters of 2020.”

The report also held the Ministry of Petroleum and the Director General (DG) oil responsible for failing to keep a check on the companies operating under the ministry and failing to ensure an uninterrupted supply of the fuel.

“During the period of crisis, the Oil and Gas Regulatory Authority (OGRA) being the regulatory body remained as apathetic to the situation as a non-functional entity could be… OGRA did issue show-cause notices to 9 OMCs and fined them a total of Rs. 50 million. However, the show-cause notices were devoid of any authentic/quantified detail and seemed more of a ritual used as a defensive ploy on part of OGRA.”

The report also revealed that the 9 companies very conveniently paid a paltry sum of Rs. 25 million – 45 percent of the total fine imposed – and went into review against the penalty. The report also highlighted the appointment of Dr. Shafi-ur-Rehman Afridi despite having no previous experience of working in the oil sector.

“The posting of the incumbent as well as previous DGs Oil has also been found against the approved criteria/rules. The current DG-Oil Dr. Shafi-ur-Rehman Afridi is a grade-20 officer of the Office Management Group (OMG) and with no previous experience related to the post of DG Oil. This fact reflects gross violation on the part of MoEPD and its non-seriousness to attend to the issues and functioning of the office of the DG Oil that plays a pivotal role in the oil/petroleum industry of Pakistan.”

The report also brought to light oil smuggling through the Taftan border with the apparent connivance of government agencies. Reportedly, Rs. 240 billion worth of oil is smuggled into the country. The inquiry revealed that this huge quantity is brought in 50,000 liters tankers via road from Iran.

The border check-posts are primarily manned by Frontier Corps (South) assisted by Pakistan Customs. “It is not possible that these huge tankers can cross the Iran border on any other route on the bare-backs of mules or humans. On condition of non-attribution, sources revealed that the smuggling is carried out in connivance with the government agencies. Once the smuggled goods are inside Pakistani territory, they are further transported to Sindh, Punjab and the K-P. The rate of delivery, however, varies with destination.”

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