Govt defends PARCO appointments

AGP flags non-production of records as Petroleum Division cites expertise

ISLAMABAD:

The federal government on Monday defended its decision to appoint bureaucrats to the board of Pak-Arab Refinery Limited (PARCO), as Pakistan's top audit office alsoflagged the company's non-production of records sought a year ago for scrutiny.

In a statement, the Petroleum Division said that "officials serving in key positions such as petroleum, finance, revenue, economic affairs and other relevant sectors possess extensive experience in national energy policy; public financial management; fiscal oversight; corporate governance; strategic infrastructure; and public sector accountability". However, it did not publicly release the profiles of the nominees to establish that all of them have "extensive experience in national energy policy" – one of the six criteria the division mentioned while defending the move.

The Express Tribune reported on Sunday that the federal cabinet had reconstituted the PARCO board and retained all current directors, barring one. It replaced Jahanzeb Khan with Rabab Sikandar, a grade-22 officer of the Pakistan Customs Service. Sikandar's husband, Sikandar Sultan Raja – the incumbent Chief Election Commissioner of Pakistan – has also served on the board in the past, according to the Election Commission of Pakistan's website. Of the five directors, four are serving bureaucrats, two in their capacity as ex-officio, and one federal minister. Secretary Petroleum Hamed Yaqoob Sheikh, the Chairman of the board, and Secretary Finance Imdadullah Bosal are the ex-officio directors.

Rashid Langrial, Chairman of the Federal Board of Revenue (FBR), and Ahad Khan Cheema, Federal Minister for Economic Affairs, have been reappointed as directors for a term of three years.

The story coincided with an audit report that the office of the Auditor General of Pakistan (AGP) laid before the National Assembly last week. In its audit report on the accounts of the Petroleum Division, the AGP listed PARCO among the entities that did not provide records for the financial year 2024-25.

The state of Pakistan holds 60% stakes in the company and has the right to appoint six directors, while the remaining seats are filled by the United Arab Emirates, which holds 40% stakes. Despite holding majority stakes, the audit report revealed that the accounts were not provided to the office for audit purposes. In the statement issued on Monday, the Petroleum Division said that "the appointment of serving public officials to the boards of state-owned enterprises, sovereign investment entities and strategic joint ventures is an internationally recognised governance practice".

The division further added that governments across the world – including those of OECD member countries, GCC states, Singapore, Malaysia and numerous European jurisdictions – nominate senior public officials to boards where the state holds significant ownership or strategic interests. Such representation promotes sound corporate governance, effective shareholder oversight, informed decision-making and protection of the public interest, according to the Petroleum Division.

PARCO is one of Pakistan's largest and most strategic energy sector enterprises. The Petroleum Division said that in view of PARCO's strategic importance, the government has always nominated experienced senior public officials.

The division said that all appointments are based on merit and relevance. The nomination of senior federal secretaries and other experienced public officials is based on the statutory responsibilities of their respective offices and the expertise they bring to the governance of strategic national assets.

Their presence on the board enables the government to exercise informed shareholder oversight while safeguarding Pakistan's strategic, financial and commercial interests, according to the division.

"The government will continue to nominate individuals possessing the requisite experience, competence and integrity to the boards of strategic enterprises in which the state has substantial ownership interests, with the sole objective of safeguarding the national interest and ensuring the highest standards," the Petroleum Division said.

It also shed light on the payment of $3,500 per board meeting fee. "The payment of directors' fees is an internationally accepted feature of corporate governance in both the public and private sectors." But the statement did not mention the exact payment that every director receives for attending the board meeting.

The board members assume significant legal and fiduciary responsibilities. They devote substantial time to reviewing financial statements, business plans, investment proposals, audit reports, regulatory compliance matters, enterprise risks and other strategic issues before participating in board deliberations and decision-making, according to the Petroleum Division.

The directors' remuneration is therefore paid in recognition of these statutory responsibilities and professional obligations, and not as an executive salary or employment benefit. The remuneration payable to directors of PARCO is determined by the board, under the company's approved corporate governance framework and applicable legal and contractual arrangements. Government nominees do not determine the fee themselves, it added.

The Petroleum Division confirmed that directors nominated by the government of Pakistan and those nominated by the Abu Dhabi shareholder receive the same compensation under the same policy. There is no distinction or preferential treatment. The fee is paid for only the board meeting and not for any committee meetings, it added.

The Petroleum Division said the PARCO board holds four scheduled board meetings annually. At this rate, each member receives $14,000 per annum.

The division said each meeting involves comprehensive preparation, detailed review of confidential commercial and financial material, and careful consideration of matters affecting one of Pakistan's largest strategic energy companies. The Ministry of Petroleum remains fully committed to the highest standards of transparency, accountability and corporate governance, it added. It hoped that the "government nominees are expected to discharge their fiduciary duties with integrity, independence and professionalism while protecting Pakistan's strategic and commercial interests".