The stakeholders of the oil sector have pointed out serious flaws in the policy of the Oil and Gas Regulatory Authority (OGRA) regarding Foreign Exchange losses adjustments, Profit learnt here on Sunday.
The reference was made to the meeting organized by OGRA on March 21, 2023, at ODGC House to discuss the Mechanism of Exchange Rate Adjustment. The agenda of the meeting was to discuss unfair and unjustified working & distribution of FX losses.
In this regard, the Chairman of the Oil Marketing Association of Pakistan OMAP wrote a letter to Chairman OGRA Masroor Khan demanding his attention to the questions raised by all the stakeholders present in the meeting.
In the letter, Chairman OMAP Tariq Wazir Ali addressed the Chairman OGRA and held him responsible for distress to emerging oil marketing companies. He wrote, “Your lack of action on these matters is causing great distress to emerging oil marketing companies who are struggling to compete with the established players in the market. Your deliberate negligence towards these demands has been deeply condemned by all oil marketing companies in a recent meeting, and it is clear that this issue needs to be addressed urgently. “
The letter of OMAP further explained the meeting’s proceedings that in the Question-Answer session, the industry pointed out very clearly that the entire industry barring PSO is facing an existential crisis and this is mainly driven by the lack of a coherent policy by OGRA.
“It was specified that in a regulated environment, it was the duty of OGRA to ensure that the industry gets a level playing field and that the industry has been miserably failed by the regulator, you have consistently failed to settle foreign exchange losses adjustment, negative IFEM, pricing, oil marketing companies margin revision, and other related issues”.
Chairman OMAP Tariq Wazir Ali went on to say regarding alarming OGRA of the situation multiple times and said, “The record is evident that OMAP is repeatedly knocking on doors of OGRA and Petroleum Ministry to adopt an efficient mechanism for FX losses disbursement to ensure that each penny of national money goes to the true & eligible entities, without any pick & choose and ill-intended calculation to fetch a fortune for non-entitled entities. Serious flaws were pointed out in the mechanism due to which the exchange losses due to the industry have not been compensated. Instead, the industry pointed out scenarios whereby the OGRA formula has allowed FX compensation to companies who did not even import any cargo”.
All top companies including multinational players pointed out the serious flaws in the formula and demanded OGRA to fix the formula and ensure a level playing field for the industry except PSO being the benchmark company.
During the meeting, OMAP strongly suggested the establishment of FAP (Foreign Exchange Adjustment Pool) for justified distribution of FX losses among genuine & rightful entities hence barring any unfair & unjustified distribution due to favoritism, actual losses in line with the pricing formula are reimbursed to the affected companies and resultant saving to the national exchequer, the prime need of the hour.
The OMCs representatives also registered a serious concern that besides clear-cut instructions given by the Minister of State on Petroleum in very loud words, the regulator failed to initiate OMCs Margins review, negative IFEM, and stock holding cost and had only focused on negating the demands of the industry on exchange losses.
OGRA’s refusal to create a level playing field is not only causing huge losses to the OMCs which is an existential threat, a bad name for the current Govt being contradictory with their directives and objective to bring ease in doing business and making essential commodities accessible and affordable for the general public.
The regulator’s current role is also seriously closing the doors for new FDIs in the sector and also impacting investor confidence and the ability of the sector to maintain strategic reserves.
In the letter, Tariq Wazir Ali wrote, “It was very unfortunate to observe that on the hidden instruction of the regulator, OMAP, the only legal entity & strong voice of emerging OMCs was denied the right to present its complete point of view, in a very derogatory & deprecatory way, that seems to be a preplanned intrigue. The role of OGRA is to regulate the oil and gas sector and ensure a level playing field for all players. However, your recent actions seem to suggest a clear bias towards the big players, which is not only unfair but also goes against the very purpose of your organization. As the guardian of this industry, it is your responsibility to ensure that all players, big or small, are treated equally and that there is no favoritism. Your impartiality is critical to ensuring that the interests of all stakeholders are protected and that the industry thrives on innovation and healthy competition.”
Furthermore, OMAP is highly disappointed with the recent vague statement issued to newspapers in response to the allegations of disbursement of foreign exchange losses adjustment to non-deserving entities.
The statement issued is quite weak, unclear, and fails to address the actual issue at hand. The allegations of disbursement of foreign exchange losses adjustment to non-deserving entities are serious and require a thorough investigation. Instead of providing a clear explanation of how these entities were selected and why they were given preferential treatment, your statement merely refutes the allegations without providing any evidence or explanation.
Furthermore, the statement does not address the larger issue of OGRA policies in favor of big oil marketing companies and discriminatory policies towards emerging OMCs. This is a major concern for the industry and the people of Pakistan, and it requires a clear and transparent response from the regulator.
He wrote that OMAP, being the true representative of emerging OMCs, is deeply troubled by this biased behavior and believes it goes against the very principles of fairness and competition that our society is based on. As a result, new emerging oil marketing companies are being compelled to adopt other remedial ways to get their rights, which will not only impact the industry negatively but also tarnish the image of OGRA as a fair regulatory authority.
“Therefore, I urge you to reconsider your decisions and policies and work towards creating a level playing field for all players”, he said adding that the new emerging oil marketing companies deserve a fair chance to succeed, and it is your responsibility to ensure that they are not unfairly disadvantaged. We hope you will take appropriate action to address these concerns and work towards creating a level playing field for all players in the market.
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