Railways seeks govt’s nod for cheaper oil transportation

Published: February 20, 2019
File photo of Karachi Circular Railways. PHOTO: REUTERS

File photo of Karachi Circular Railways. PHOTO: REUTERS

ISLAMABAD: Minister for Railways Sheikh Rasheed Ahmad has come up with a demand that the government should allow Pakistan Railways oil transportation at cheaper tariffs rather than building a white oil pipeline from Machike to Tarujabba.

The minister floated the proposal in a recent meeting of the Economic Coordination Committee (ECC).

During the huddle, the Oil and Gas Regulatory Authority (Ogra) chairperson gave a presentation on tariffs for oil transportation through the pipeline, after which the railways minister suggested a plan for oil shipment through the railways.

The Ogra chairperson pointed out that levelised tariff for oil transportation through the pipeline planned to be laid by Frontier Oil Company would be Rs2,406 per ton, which constituted 88% of the current road tariff.

However, the Petroleum Division told the ECC that tariff for the white oil pipeline planned to be laid by Inter State Gas Systems (ISGS) from Machike (Sheikhupura) to Tarujabba (Peshawar) would be Rs1,075.33 per ton, which was just 40% of the current road tariff. The rate was secured through competitive bidding, it said.

Frontier Oil dismissed the tariff rates for the oil pipeline, terming them incorrect.

In the past, Pakistan Railways had played a key role in transporting oil to different parts of the country. The oil shipment through the railways was not only a cheaper source, but it also provided a steady stream of earnings for the state-owned company.

Later, the tanker mafia entered the fray and created a monopoly in collusion with people in the power corridors, depriving Pakistan Railways of the business.

According to officials, Pakistan Railways has already the infrastructure in place and oil transportation through the railways will stop its financial bleeding.

The ECC decided that a cheaper commercial option would be adopted for oil supply to different destinations including supply through the Machike-Tarujabba pipeline at competitive commercial rates.

In June 2017, the Ministry of Petroleum and Natural Resources had directed ISGS to initiate construction of an oil pipeline from Machike to Tarujabba through competitive bidding. It got approval from the ECC in November 2017 and applied for a licence.

Meanwhile, Ogra granted licence to Frontier Oil Company in June 2018 whereas the ISGS bid expired on September 22, 2018.

During the ECC meeting, its members noted that the petroleum ministry had assigned the task of laying the pipeline to ISGS whereas Ogra gave licence to Frontier Oil for building a white oil pipeline on the same route.

The ECC shelved the pipeline project planned by ISGS due to the expiry of its bid and decided to allow oil transportation on a commercial basis.

Published in The Express Tribune, February 20th, 2019.

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