Pakistan State Oil (PSO) has expressed its inability to ensure the import of petroleum products for other Oil Marketing Companies (OMCs) in the country.
PSO General Manager (Supply), Asad Faiz, in a letter to the Ministry of Energy (Petroleum Division), has raised voice against OGRA for suggesting it (PSO) to import petroleum products for other Oil Marketing Companies (OMCs).
He said that PSO currently has only one fuel supply contract under a government-to-government (G2G) arrangement with Kuwait Petroleum Corporation (KPC) for supplies of HSD and the contractual volumes with KPC are already fully utilized to cater to PSO’s requirement.
In addition the suggestions put forth by OGRA are not only anti-competitive but they also appear to be contrary to the public interest as it would most likely create supply chain related issues due to which the general public would suffer.
Moreover, the suggestions by OGRA would create legal implications, said the PSO letter.
According to the letter from PSO, the market situation is highly volatile with regards to product availability and like other OMCs, PSO is also going through the same situation. However, PSO, being a responsible organisation, is still meeting its obligations and arranging products irrespective of commercial considerations and bearing the huge circular debt.
“Considering the situation, PSO is neither in a position to take responsibility for imports of other OMCs as this may also become a single point of failure for the country’s supply chain nor does PSO have the mandate or financial capacity,” said the PSO letter.
“Moreover, due to increasing oil prices and huge PSO’s receivables under circular debt (currently at Rs464 billion), PSO is struggling in opening LCs for its own imports and there is no cushion at all to open LCs for other imports,” added the letter.
PSO has consistently highlighted this non-compliance in Product Review (PR) meetings and has also cautioned regarding the risk to the country’s supply chain in several PR and other meetings with OGRA. However, no positive action on part of OMCs has been witnessed till date which is exposing the country to the risk of dry out.
PSO’s increased market share and additional unplanned consumption of HSD in the power sector in January and February 2022 had to procure two additional HSD cargoes through international tenders in March 2022. For motor gasoline (MOGAS), PSO’s entire imports are through an international tendering system, and there is no G2G arrangement in place.
Recovery of other OMCs’ landed costs is an entirely commercial matter, and such ups and downs are part of doing business. There may be several occasions when smaller OMCs take opportunities by importing and selling according to the price regime and earn windfall profits.
All OMCs are responsible for meeting their licensing obligations, while OGRA’s role is the enforcement of licensing conditions irrespective of commercial considerations for smaller OMCs.
Nice article regarding PSO and very goods elaborating on price and control