ISLAMABAD: The Oil Companies Advisory Council (OCAC) has called on the Oil & Gas Regulatory Authority (OGRA) to investigate unjustified high-speed diesel (HSD) imports by a private Oil Marketing Company (OMC) and to scrutinize how the company can offer oil at discount rates beyond its margin.
In a letter dated August 1, 2024, addressed to Masroor Khan, Chairman of OGRA, with the subject “Urgent Action: Concerns Regarding Unfair Market Practices at the Cost of Oil Industry,” the OCAC raised urgent concerns about the impact of these imports on the local oil industry.
The OCAC highlighted that HSD imports by the private OMC have surged from 15,000 MT per month to 40,000 MT per month, with the product being distributed through unfair practices. Despite local refineries having surplus product and renting additional storage, OGRA continues to approve these imports without accurately assessing the country’s demand, exacerbated by cross-border movements.
The letter stressed that capital investment in the OMC should not compromise the local industry by allowing unnecessary imports. This practice deviates from prioritizing refinery products and puts pressure on Pakistan’s foreign exchange reserves.
“The capital injection and investment coming into an Oil Marketing Company should not be done at the cost of local industry by allowing unnecessary imports on one pretext or the other. It not only contradicts the established practice of prioritizing uplift from refineries, but also places additional pressure on Pakistan’s foreign exchange reserves,” said the OCAC letter.
The OCAC pointed out that the private OMC has been offering HSD at a discount of around Rs. 10 per litre, which exceeds the OMCs’ margin of Rs. 7.87 per litre. This hefty discounting erodes the market share of other companies and leads to illegal dumping of the product at other stations, without benefiting consumers at petrol stations.
“The private oil marketing company in question has been offering oil at a discount of around Rs. 10 per litre, a figure exceeding the OMCs’ margin of Rs. 7.87 per litre. This hefty discounting is not only eroding the legitimate market share of other companies but is also leading to the illegal dumping of the company’s product at other companies’ stations through the lure of hefty discounts. It should be noted that these discounts have not translated into lower prices for consumers at petrol stations and cannot be considered a public benefit,” reads OCAC letter.
OCAC urged OGRA to investigate how the private company can offer such substantial discounts and expressed concerns over potential connections to smuggled petroleum products.
“Given these circumstances, it is imperative that OGRA thoroughly investigates how any private company can offer such substantial discounts beyond its margins. Further, there are reports suggesting an influx of smuggled petroleum products into Pakistan, raising the possibility that these discounts may be connected to such smuggled products,” said the OCAC letter.
Despite OGRA’s authority to approve imports, the OCAC emphasized the need for the regulator to safeguard the local industry in the national interest. It noted that Pakistan State Oil (PSO) had cancelled around 450 kilotonnes (KT) of HSD imports since January 2024 to support refineries amid low demand.
The OCAC recommended prohibiting non-KPC imports and directing OMCs to coordinate with refineries to uplift products, especially if past commitments have not been met. It warned that neglecting actual demand and prioritizing imports over refinery products strains foreign exchange reserves and fosters unfair competition.
It is pertinent to mention that the oil industry, including refineries, has expressed deep concern and dissatisfaction with the current situation. The OCAC urged OGRA to investigate the matter diligently and take necessary actions to protect legitimate businesses and the local industry in Pakistan.
