OGRA criticised for ‘flawed’ FX loss adjustment policy

Stakeholders in the oil sector have raised serious concerns over the flawed policy of the Oil and Gas Regulatory Authority (OGRA) regarding the adjustment of foreign exchange (FX) losses. The stakeholders criticised OGRA during a meeting held on March 21, 2023, for its unfair working and distribution of FX losses.

Chairman of the Oil Marketing Association of Pakistan (OMAP), Tariq Wazir Ali, addressed a letter to Chairman OGRA, Masroor Khan, demanding attention to the questions raised by all the stakeholders at the meeting. “Your lack of action on these matters is causing great distress to emerging oil marketing companies who are struggling to compete with the established players in the market. Your deliberate negligence towards these demands has been deeply condemned by all oil marketing companies in a recent meeting, and it is clear that this issue needs to be addressed urgently,” wrote Ali.

The letter highlighted the industry’s concerns regarding OGRA’s lack of a coherent policy, leading to an existential crisis for all companies except the Pakistan State Oil (PSO). It emphasised the regulator’s failure to settle FX losses adjustments, negative International Freight Exchange Margins (IFEM), pricing, margin revisions for oil marketing companies, and other related issues.

Ali pointed out multiple instances where OMAP had alerted OGRA about the flaws in the mechanism for FX losses disbursement, which resulted in compensation to companies that did not even import any cargo. Top companies, including multinational players, also criticised the flawed formula and demanded OGRA to rectify it and ensure a level playing field for the industry, excluding PSO.

OMAP suggested the establishment of a Foreign Exchange Adjustment Pool (FAP) for the justified distribution of FX losses among deserving entities, eliminating any unfairness or favouritism. The pool would ensure that affected companies receive reimbursement for actual losses based on the pricing formula, leading to savings for the national exchequer.

Furthermore, the letter expressed concerns about OGRA’s failure to review OMCs’ margins, negative IFEM, and stock-holding costs, despite clear instructions from the Minister of State on Petroleum.

OGRA’s refusal to create a level playing field not only resulted in substantial losses for OMCs but also contradicted the government’s objective of facilitating business and ensuring affordable commodities for the public.

The regulator’s biased approach was negatively impacting investor confidence, hindering foreign direct investment (FDI), and affecting the sector’s ability to maintain strategic reserves.

OMAP criticised OGRA for denying the association’s right to present its complete point of view during the meeting and accused the regulator of displaying bias towards major players. The letter emphasised OGRA’s responsibility to treat all players equally and impartially regulate the industry.

Additionally, OMAP expressed disappointment with OGRA’s recent wage statement, which failed to address the allegations of disbursement of FX losses to undeserving entities. The association demanded a thorough investigation and transparent explanation regarding the selection and preferential treatment of these entities.

OMAP called for a clear response from the regulator regarding its policies favouring major oil marketing companies and discriminating against emerging OMCs.

The letter concluded by urging OGRA to reconsider its decisions and policies and strive to create a level playing field for all players in the market. It emphasized the importance of fairness, competition, and equal opportunities for new emerging oil marketing companies to thrive in the industry. OMAP hoped that OGRA would take appropriate action to address the concerns and restore confidence in its role as a fair regulatory authority.

Published in The Express Tribune, June 22^nd, 2023.

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