PSO seeks autonomy amid rising competition from global players

State-owned OMC requests the govt to delegate regulatory powers from PD to its board in a bid to compete with Gulf Oil Marketing Company and Saudi Aramco 

ISLAMABAD: Pakistan State Oil (PSO) has urged the federal government to shift regulatory control from the Petroleum Division to its board of management (BOM) amid rising competition and mounting losses.

According to sources, PSO, the only public sector oil marketing company (OMC) responsible for maintaining Pakistan’s energy supply chain, is allegedly facing significant losses in the wake of intensified competition from international players such as Gulf Oil Marketing Company and Saudi Aramco. 

In a bid to safeguard its financial future and remain competitive, PSO has requested the government to delegate regulatory powers from the Petroleum Division to its BOM to level the playing field as it faces mounting competition and financial losses.

Sources disclosed that PSO has made a formal request to the Secretary of the Petroleum Division for an urgent review of its operating framework. The company argued that the existing Public Procurement Regulatory Authority (PPRA) rules and bonded warehouses policy are hampering its ability to compete. These regulations require PSO to disclose its purchase prices and engage suppliers through a tendering process, which gives foreign competitors a distinct advantage in negotiations allowing them to undercut PSO by securing better deals, especially when it comes to distress cargo at favorable rates, said sources.

The company has emphasized that such restrictive regulations are only applicable to PSO, which exposes it to higher financial risks. PSO’s management has raised concerns about the long-term sustainability of the company under the current regulatory regime. 

To rectify this, the company has called for the federal government to delegate its powers, functions, and shareholding to the BOM. This move would allow the BOM to operate autonomously while still adhering to government policies and appointments for the chairman and managing director. 

The company said that this shift would make it more progressive, competitive, and capable of weathering the challenges posed by foreign players.

PSO’s letter also points out the overlaps between the recently enacted State-Owned Enterprises (Governance and Operations) Act, 2023 (SOE Act), and the Marketing of Petroleum Products (Federal Control) Act, 1974. Under the SOE Act, there is a provision for state-owned enterprises to develop independent procurement policies, which, once approved by the federal government, would limit the applicability of PPRA rules. PSO has already submitted its procurement policy to the Petroleum Division for approval and is awaiting further action.

The company’s BOM has also noted that the current federal control over PSO obliges it to comply with various laws, including government audits, which often put the company at a disadvantage. As an example, PSO highlighted the Securities and Exchange Commission of Pakistan (SECP), which operates with more independence under its policy board, allowing it flexibility in operations.

During discussions with the Finance Division in May 2024, where PSO was represented by its senior management, these regulatory inconsistencies were highlighted. The Finance Division, alongside representatives from the Central Monitoring Unit (CMU) and the Asian Development Bank, acknowledged the overlapping provisions and discussed potential amendments to the Act.

The BOM has unanimously decided to explore the possibility of the federal government delegating authority to PSO’s Board of Management under Section 13 of the Marketing of Petroleum Products (Federal Control) Act, 1974. This would create a buffer between the company and the government, allowing PSO greater operational freedom and enhancing its competitiveness in the challenging oil market.

PSO has faced significant financial losses over the past few months, particularly due to the entry of Gulf Oil Marketing Company and the growing influence of Saudi Aramco. The company’s leadership believes that gaining more autonomy from government control will help stabilize operations and secure its financial future, enabling it to compete effectively against international oil marketing companies.

As PSO awaits approval of its procurement policy and potential regulatory changes, the company remains committed to maintaining its position as a strategic national asset. However, the need for operational independence is becoming increasingly urgent as PSO navigates the complexities of the competitive oil market.

Despite repeated attempts, a PSO spokesperson did not respond to questions.

Ahmad Ahmadani
Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected].

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