The Oil and Gas Regulatory Authority (OGRA) has granted 21 licenses to new Oil Marketing Companies (OMCs) in six months, contrary to the financial criteria earlier approved by the Council of Common Interests (CCI), it is learnt reliably.
Reliable sources at OGRA informed Pakistan Today that the present authority has issued 21 licenses to new OMCs according to new Oil Rules, 2016. The financial criteria for these new OMCs were set as equity of Rs 100 million and a total investment of Rs 500 million during the initial three-year period. They said though these new oil rules are currently sub judice in the honourable Islamabad High Court (IHC), however, this financial criterion is absolutely contrary to the financial criteria approved by CCI.
According to Rule 35-C of New Oil Rules, 2016 approved by the CCI which is presided by Prime Minister Muhammad Nawaz Sharif, the financial criteria for new OMC states that equity of Rs 3 billion and a total investment of Rs 6 billion during the initial 3 years is required, sources said.
The sources further said that OGRA, in a bid to give legal cover to the grant of 21 licenses to new OMCs, had moved an amendment to rule 35 (c) of new Oil Rules, 2016 to the government. And, the authority (OGRA) set an equity and total investment requirement for the applicants (OMCs) at Rs. 100 million and Rs. 500 million respectively, as per clarification of the ministry of law and justice, received through cabinet division vide its letter No. 1/4/2003-RA-II/OGRA dated 7th June 2016. They said the financial criteria cannot be changed without the approval of CCI.
It is also learnt that without an amendment of section 44 (3) ( C ) of OGRA Ordinance by the parliament, OGRA cannot issue OMC licenses to any new OMC according to new Oil Rules, 2016. “Even, if the stay order is vacated by the IHC, the amendment in OGRA Ordinance, 2002 can only be effective by the act of parliament. Whereas, OGRA has so far issued 21 licenses to new OMCs as per new Oil Rules, 2016,” sources said.
Sources also informed that OMC license fee was charged as Rs 2.0 million instead of Rs 5.0 million as already approved by the previous OGRA authority. They said the benefit of Rs 3.0 million to each new OMC was given, causing a colossal loss to the national exchequer. Out of these 21 new oil marketing companies, Oleum Petroleum (Pvt) Ltd is owned by an influential from Barri Imam (Islamabad), while ACCEL Petroleum (Pvt) Limited is owned by Ahmed Saeed who is the brother of Saeed Mehdi, Chairman SNGPL and former boss of Uzma Adil Khan, the present chairperson OGRA, said sources.
It is pertinent to mention here that although the Oil and Gas Regulatory Authority (OGRA) has failed to make the licensed oil marketing companies (OMCs) comply with the clause stipulating the construction of oil storages over past few years, yet it has issued licenses to 21 more OMCs in just six months to attract further investment.
Performance/ progress of OGRA relating to oil sector during six months (i.e. July – December 2016) disclosed that it (OGRA) has opened floodgates to the oil marketing companies (OMCs) by granting 21 licenses in just six months, compared to only 20 over the past 70 years.
The new 21 companies are expected to invest about Rs10.5 billion over the next few years to set up storages and filling stations in various parts of the country. OGRA has also given marketing permission to five others. In addition, four licenses were granted for the development of new oil storages and terminals at different locations while two lube oil blending plants and six lubricant marketing companies were granted licenses in the last six months.
In addition, four licenses were granted for the development of new oil storages and terminals at different locations, while two lube oil blending plants and six lubricant marketing companies were granted licenses in the last six months.
According to the criteria for issuance of petroleum products’ marketing license, a new company should develop storages at locations and capacities corresponding to their business strategy, estimated business volumes and associated economics. Moreover, investment plan of the company should concentrate on infrastructure development of depots, installations etc. And, the new company must create a minimum storage of 20 days of their proposed sales as infrastructure prior to beginning sales in the country. A specific plan to this effect over a period of 3 years shall also be provided. However, so far, none of the Oil Marketing companies e.g, PSO, Shell, Total, Askar-1, Hascol etc has 20 days backup oil storage capacity to support their sales and OGRA still gave them a preferential treatment to continue their marketing operations over other new OMCs.
When contacted a spokesman of OGRA to get the stance of the present authority, he said,” Will reply your answers tomorrow morning. “It will be highly appreciated if the quarries are asked during office hours i-e 09 am to 05 pm,” said the spokesman.
