Audit report: PSO doles out billions to competitors, defaulters

The company continues to supply oil to defaulting stations.

ISLAMABAD:

The Pakistan State Oil (PSO) is doling out billions of rupees to its competitors by offering them POL products’ stocks from its depots for sale in open market at a 50/50 profit margin, an equation which can only be exercised in a public entity where management seems interested in damaging its own organisations to benefit others’ interests.

“Everything in PSO is not fine. Its management is indulging in unlawful act of supplying POL products to those dealers who are chronic defaulters, besides voluntarily losing its market share to other oil marketing companies (OMCs),” says a company audit report, a copy of which was made available to the Express Investigation Cell (EIC).

Share, with no cost

The report questions a number of PSO decisions, including an agreement with five OMCs – Askar Oil Services (Pvt) Limited, Overseas Oil Trading Company, Chevron Pakistan Limited, Admore and Bakri Trading Co – for sale of high speed diesel (HSD) and premier motor gasoline (PMG) from its depots/sale points.

The agreement allows OMCs to receive a 50% share on margin on sale of petroleum products without investing or importing oil. In other terms, the agreement is meant to give undue advantage to OMCs at PSO’s cost and investment.  PSO is also involved in illegal sale of HSD and PMG to Hasool Petroleum, Askar Oil Services (Pvt) Limited and Overseas Oil Trading Co without any agreement, the report says.

Pampering defaulters

Besides the agreements to benefit its own competitors, PSO is pampering willful defaulters by maintaining uninterrupted oil supply, despite them not paying their outstanding dues.

The PSO credit policy calls for doing business with credit-worthy parties only, to avoid default on payment, and adds that “no credit is to be extended outside the approved credit policy.”

The entity is generous towards its competitors and defaulting dealers, despite having circular debt over Rs100 billion and living on banks loans to import crude and refined petroleum products.

Surprisingly, the watchdog PSO board could not perform its due role either, and allowed the management to continue the policy of pampering defaulters and giving away its market share to competitors.

The report lists major chronic defaulters who have been receiving oil supply worth millions despite being on the defaulters list for years. These include Mushtaq filling station, Gujranwala, defaulter since 2005; Syed Ahmed and Co, Faisalabad, defaulter since 2007; Madina Tracking, Sukkur, defaulter since 2008; Tariq Petroleum Station, Hyderabad, defaulter since 2008; Tahir Petroleum Station, Sukkur, defaulter since 2008; Al-Faisal Filling Station, Lahore, defaulter since 2008; Asim Filling Station, defaulter since 2009; Mohsin Petroleum Service, Bahawalpur, defaulter since 2009; Amin Service, Lahore, defaulter since May 2010; Jawad Filling, Peshawar, defaulter since April 2011.

Other stations include New Aero Service Station, Faisalabad Filling Station, Panjikabata Filling Station, Kohistan Petroleum Services, Khurshid Filling Station, Moonlight Filling Station, Mian Filling Station, Seven Star Filling Station, Shaikh Shahid Filling Station, Faran Filling Station, Fazal Filling Station, Mahboob Filling Staion, Musa Nikka Filling Station, Habib Filling Station, Awan Associates and Z M filling station.

The company’s Managing Director Jahangir A Shah defended PSO’s decision of supplying POL products to defaulting dealers without recovering outstanding dues from them. He was also convinced that the decision to offer company’s stocks to other OMCs at 50/50 profit margin was not against the company’s interest.

“PSO is following a conscious strategy by offering its POL stock to other OMCs to increase its revenue,” the managing director said.

Published in The Express Tribune, January 18^th, 2012.