muhammadhafeezmalik
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A commission of inquiry formed in July this year to probe into a sudden shortage of petrol in the country has noted that one of the reasons behind the crisis was a lack of coordination among the departments working under the Petroleum Division. This is revealed in a report of the Federal Investigation Agency (FIA) led inquiry panel. The commission has submitted its report to Prime Minister Imran Khan who has asked the relevant officials to present it before the federal cabinet in its meeting to be held on Tuesday [today].
The report available with The Express Tribune said oil marketing companies (OMCs) were primarily responsible for the shortage of the fuel that hit the country in early June as they deliberately stopped supplying petroleum products to pumps despite having considerable stocks at their disposal.
It said the OMCs made from Rs6 to Rs8 billion during the June oil crisis by committing every illegality in “business as usual” manner. It said the crisis period between June1 to June 26 needed to be discussed specifically to see how the OMCs fared during this time.
“The prices of MS [petrol] were substantially cut on May 31 and the new price was set at Rs74.52 per liter [in view of lowering oil prices in the international market].
It said as the OMCs would incur a substantial Inventory loss by free sale in June, they took the easy way out to simply slow down or dry out supplies, against all legal and moral norms.
“Consequently, the shortage of MS began to surface across Pakistan and the filling stations gradually became dry, denying the public at large to reap the benefit of this substantial price cut.”
It said the OMCs, in contravention of license conditions, slowed down the supply of petrol to their filling stations. On a lesser scale, the filling stations also held back on whatever stock they had in their tanks.
“All OMCs [other than the Pakistan State Oil (PSO) and Shell] proportionally held on to their stocks with knowledge of anticipated rise in prices. This has been proven during ground check of filling stations and records submitted by the OMCs with affidavits,” the report said.
During this period of crisis, it said, the OMCs showed sales on paper but the ground check of filling stations across Punjab clearly revealed that the OMCs were well short on supply.
“It is clear that all OMCs had a fairly good idea of a price increase of at least Rs20/liter and thus illegally hoarded their stocks during the crisis, stripping the public at large of billions of rupees.”
It said the PSO being a state-owned entity could not follow this illegal suit due to the prevailing situation. Consequently, its market share in the period of shortage increased by nearly 20% and consequently, it sustained a loss of Rs7-8 billion in the process.
“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 Rs8 billion in the first two quarter of 2020.”
The report said the Ministry of Petroleum and the director general (DG) oil also failed to ensure uninterrupted supply of the fuel while the governmental institutions working under the Petroleum Division also failed to check the stock of oil marketing companies.
“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 Rs50 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.
“Further, the 9 companies very conveniently paid a paltry sum of Rs25 million – 45 % of the total fine imposed – and went into review against the penalty,” it said.
The report noted that Dr Shafi-ur-Rehman Afridi, a veterinary physician by training, was appointed as the DG Oil. It noted that Dr Afridi had 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 said Imran Ali Abro – a research officer/contract employee from Inter State Gas Systems has also been working in the Petroleum Division for the last 6 years against the rules.
“Interestingly, scrutiny of the personal file of Mr Imran Ali Abro during subject inquiry proceedings has revealed that the DGs Oil have been writing to the concerned private company under MoEPD for his regularization of service and extension in his contract period against the rules,” it said.
The commission also highlighted the issue of oil smuggling through Taftan border with the apparent connivance of government agencies. It said Rs240 billion worth oil is smuggled into the country.
“The question arises as to how such a huge amount [of petrol] gets across the Taftan border and further across the country with multiple agencies working to curb this menace.”
It said 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.”
It said the smuggling by sea route must also be of huge volumes. The report said the assessment of loss to the exchequer and the economic impact through this mode of smuggling is difficult to assess.
“However, the commission would strongly recommend a deeper probe with respect to dubious functioning of BYCO Refinery,” it added.
The report proposed taking harsh punitive measures against the people and institutions responsible for the crisis. The commission also included in the report the questions it asked from the Ministry of Petroleum as well as the ministry’s replies.
Adviser to Prime Minister on Accountability and Interior Shahzad Akbar on Monday confirmed in a tweet that the report has been received and would be presented before the federal cabinet on Tuesday.
The Petroleum Commission’s report would be made public after the federal cabinet’s approval. “Transparency and accountability is the hallmark of the PTI government,” he added.
The federal cabinet on July 29 approved a proposal for the constitution of a commission of inquiry to investigate the causes of the shortage of petrol that hit the country in early June.
tribune.com.pk
Commission names those behind June oil ‘crises’
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.
The report available with The Express Tribune said oil marketing companies (OMCs) were primarily responsible for the shortage of the fuel that hit the country in early June as they deliberately stopped supplying petroleum products to pumps despite having considerable stocks at their disposal.
It said the OMCs made from Rs6 to Rs8 billion during the June oil crisis by committing every illegality in “business as usual” manner. It said the crisis period between June1 to June 26 needed to be discussed specifically to see how the OMCs fared during this time.
“The prices of MS [petrol] were substantially cut on May 31 and the new price was set at Rs74.52 per liter [in view of lowering oil prices in the international market].
It said as the OMCs would incur a substantial Inventory loss by free sale in June, they took the easy way out to simply slow down or dry out supplies, against all legal and moral norms.
“Consequently, the shortage of MS began to surface across Pakistan and the filling stations gradually became dry, denying the public at large to reap the benefit of this substantial price cut.”
It said the OMCs, in contravention of license conditions, slowed down the supply of petrol to their filling stations. On a lesser scale, the filling stations also held back on whatever stock they had in their tanks.
“All OMCs [other than the Pakistan State Oil (PSO) and Shell] proportionally held on to their stocks with knowledge of anticipated rise in prices. This has been proven during ground check of filling stations and records submitted by the OMCs with affidavits,” the report said.
During this period of crisis, it said, the OMCs showed sales on paper but the ground check of filling stations across Punjab clearly revealed that the OMCs were well short on supply.
“It is clear that all OMCs had a fairly good idea of a price increase of at least Rs20/liter and thus illegally hoarded their stocks during the crisis, stripping the public at large of billions of rupees.”
It said the PSO being a state-owned entity could not follow this illegal suit due to the prevailing situation. Consequently, its market share in the period of shortage increased by nearly 20% and consequently, it sustained a loss of Rs7-8 billion in the process.
“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 Rs8 billion in the first two quarter of 2020.”
The report said the Ministry of Petroleum and the director general (DG) oil also failed to ensure uninterrupted supply of the fuel while the governmental institutions working under the Petroleum Division also failed to check the stock of oil marketing companies.
“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 Rs50 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.
“Further, the 9 companies very conveniently paid a paltry sum of Rs25 million – 45 % of the total fine imposed – and went into review against the penalty,” it said.
The report noted that Dr Shafi-ur-Rehman Afridi, a veterinary physician by training, was appointed as the DG Oil. It noted that Dr Afridi had 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 said Imran Ali Abro – a research officer/contract employee from Inter State Gas Systems has also been working in the Petroleum Division for the last 6 years against the rules.
“Interestingly, scrutiny of the personal file of Mr Imran Ali Abro during subject inquiry proceedings has revealed that the DGs Oil have been writing to the concerned private company under MoEPD for his regularization of service and extension in his contract period against the rules,” it said.
The commission also highlighted the issue of oil smuggling through Taftan border with the apparent connivance of government agencies. It said Rs240 billion worth oil is smuggled into the country.
“The question arises as to how such a huge amount [of petrol] gets across the Taftan border and further across the country with multiple agencies working to curb this menace.”
It said 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.”
It said the smuggling by sea route must also be of huge volumes. The report said the assessment of loss to the exchequer and the economic impact through this mode of smuggling is difficult to assess.
“However, the commission would strongly recommend a deeper probe with respect to dubious functioning of BYCO Refinery,” it added.
The report proposed taking harsh punitive measures against the people and institutions responsible for the crisis. The commission also included in the report the questions it asked from the Ministry of Petroleum as well as the ministry’s replies.
Adviser to Prime Minister on Accountability and Interior Shahzad Akbar on Monday confirmed in a tweet that the report has been received and would be presented before the federal cabinet on Tuesday.
The Petroleum Commission’s report would be made public after the federal cabinet’s approval. “Transparency and accountability is the hallmark of the PTI government,” he added.
The federal cabinet on July 29 approved a proposal for the constitution of a commission of inquiry to investigate the causes of the shortage of petrol that hit the country in early June.
OMCs made Rs8b during petrol crisis: inquiry report | The Express Tribune
Says lack of coordination among departments also one of causes of fuel shortage in June
Commission names those behind June oil ‘crises’
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.
BR-ePaper | Dec 15, 2020 | Page Front Page 1
epaper.brecorder.com
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