FDI in OMC sector under threat

Prolonged probe into June 2020 oil crisis hindering investment

KARACHI:

Long-running inquiries by government departments into the oil crisis witnessed in June 2020 are hindering foreign direct investment (FDI) in oil marketing companies (OMCs) sector of Pakistan.

In a statement on Wednesday, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Nasser Hyatt Maggo expressed concern over the “unfair practices of government departments and unjust treatment of smaller OMCs”.

“The smooth functioning of OMCs is indispensable for any economy and consistent investments in midstream and downstream sectors are equally desirable,” he said.

In the aftermath of the nationwide petroleum crisis in June 2020, the Federal Investigation Agency (FIA) had been tasked to conduct an inquiry. On the basis of the investigation, the government directed the Petroleum Division to take necessary action against the OMCs and fuel stations involved in creating artificial shortage of petrol.

Besides, the government also called for introducing legal reforms and amendments to laws and procedures, and presenting them to the Cabinet Committee for Disposal of Legislative Cases (CCLC).

Maggo expressed dissatisfaction over the long-running inquiries and investigations, and highlighted that the OMCs were being kept unnecessarily occupied with regulatory tangles. Had any wrongdoings been found in the inquiry report, the culprits should have been punished by now, he said.

Maggo pointed out that massive investments in midstream and downstream sectors were required to enable them to enhance refinery capacities and modernise their end-products to minimise carbon emissions. “A major part of these investments will come through foreign direct investment coupled with technology transfer,” he said. “In this regard, harassment of OMCs by government officials is proving to be detrimental.”

Maggo said that the imposition of fines coupled with the delay in NOCs for retail outlets had created a discouraging environment for the sector.

He pointed out that industry officials were approaching the chamber and voicing concern over the issue. A source having knowledge of the matter confirmed that a few inquiries were still underway and government officials occasionally harassed the OMCs, especially the smaller players.

“It is important for the government to accelerate these inquiries because delays hurt investor sentiment,” said Topline Securities Head of Research Atif Zafar in comments to The Express Tribune.

“Investment in the downstream oil industry is the need of the hour as it will reduce reliance on imports,” he said.

Published in The Express Tribune, August 5^th, 2021.

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