Resisting oligopoly

There is a reasonable case to be made that the government of Pakistan plays too large a role in the economy, unproductively controlling prices in some sectors and owning companies in others. We have favoured many proposals in the past that seek to limit the role of government intervention in the marketplace. But there is a fine line between seeking more economic liberty and seeking oligopolistic control of an industry, and the oil marketing companies appear to distinctly favour the latter.



Petroleum retailing is a highly concentrated industry, with the government-owned Pakistan State Oil accounting for over two-thirds of the market. It is also one that most directly affects the vast majority of Pakistanis on a daily basis. While regulating prices directly may not necessarily be the most constructive policy approach, strict regulation of this industry makes eminent sense. But the industry’s lobbying group — the Oil Companies’ Advisory Committee — is not just seeking a different regulatory regime, it is seeking the abolition of all regulations altogether, calling for the dissolution of the Oil and Gas Regulatory Authority (Ogra).

There is absolutely no justification for the government to give in to this proposal and we urge the Nawaz Administration to reject it. We admit that the current pricing regime is not the most efficient mechanism, and perhaps a regulatory policy that allows more leeway to the oil companies in setting prices could be justified. However, if the oil companies are given more autonomy, that does not eliminate the need for Ogra. Indeed, it only increases the need for a regulatory body whose sole task is to ensure that there is no anti-consumer collusive activity amongst the oil companies.

The average Pakistani already has very little faith in the institutions that govern our political economy. Allowing oligopolies to get their way would only serve to further that image and strengthen the hands of those who seek to paint the very existence of our republic as illegitimate. For their part, the oil companies would do well to seek constructive changes in policy and avoid getting greedy. It is in their own long-term interest to do so.

Published in The Express Tribune, December 2^nd, 2013.

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