PHOTO: FILE
During the PML-N government’s tenure, the Economic Coordination Committee (ECC) considered a summary in a meeting held on June 6, 2015 and directed that state-run Pakistan State Oil (PSO) may import premium motor gasoline (petrol) and low sulphur fuel oil (LSFO) on cost and freight (c&f) basis while high sulphur fuel oil may continue to be imported on free on board (fob) basis through PNSC.
PSO was allowed to import petroleum products except for furnace oil on c&f basis by inviting bids for three months in order to ensure consistent and smooth supply of petrol, diesel and other products.
The decision was taken as PNSC had an inadequate fleet as it owned only a few vessels.
Consequently, PNSC started chartering vessels from other shipping companies for bringing petroleum products, which led to frequent disruptions and operational issues in the PSO supply chain because of delay in reporting by vessels at cargo-loading ports and subsequent delay in arrival at the offloading port - Karachi.
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A major reason for acute petrol shortages in January 2015 was also the late arrival of two PNSC vessels despite timely opening of letters of credit. Officials told The Express Tribune that the Ministry of Maritime Affairs informed the government that shipping was widely regarded as the backbone of global economy, handling more than 80% of global trade by volume and over 70% by value.
The United Nations Conference on Trade and Development (Unctad) adopted a code of conduct in 1974 aimed at taking into account the special needs and challenges faced by developing countries concerning their shipping needs.
Unctad adopted a cargo-sharing formula, also known as 40-40-20 rule, which stipulates 40% of cargo should be directed to national vessels of the originating country, 40% to vessels of trading partners and 20% to other vessels, thus establishing protection and development of national shipping lines by way of preferential treatment as a globally accepted practice.
The United Nations’ Framework for Development of National Shipping Policies recognises such policies contribute to long-term stability of the nation and could be used as a means of increasing global trade.
Most of Pakistan’s major trading partners including China, USA, Turkey and South Korea provide protection to their national flag carriers.
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At present, Pakistan’s own merchant shipping fleet transports only about 16% of the total seaborne trade against the required 40%, which is also part of the Pakistan Merchant Marine Policy 2001.
Hence, the nations engaged in maritime trade across the world patronise their national flag carriers by providing various relaxations, cargo preferences and incentives for developing the national fleet.
In line with international practices, the government of Pakistan has also adopted these practices through law and policies aimed at giving preference and first right of refusal to the flag carrier.
Published in The Express Tribune, June 20th, 2019.
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