Said stocks were enough for 18 days, shortages appeared immediately. DESIGN: MASHKOOR AHMED
The Ministry of Petroleum and Natural Resources has misled the economic managers about the oil stocks which have dropped sharply, leading to a petrol crunch in Punjab.
The oil crisis would continue for one more week, said Petroleum Minister Shahid Khaqan Abbasi while speaking at a press conference on Friday.
Officials told The Express Tribune that the petroleum ministry had informed the Economic Coordination Committee (ECC) in its meeting on January 10 that the country’s oil stocks on an average were enough for 18 days of consumption on January 6. The figures were calculated by the director general oil of the petroleum ministry.
However, Punjab started facing petrol shortages soon after the ECC meeting. Within days, the situation worsened and petrol stations ran dry with people scrambling to purchase whatever fuel available at the filling stations.
In response to the petrol scarcity, Petroleum Secretary Abid Saeed, Additional Secretary Mohammad Naeem Malik, Director General Oil Muhammad Azam and Pakistan State Oil (PSO) MD Amjad Parvez Janjua were suspended on Saturday, confirmed officials in the petroleum ministry, PSO and the Prime Minister’s Secretariat.
PSO said efforts to cope with the surge in petrol demand were impeded by Pakistan National Shipping Corporation (PNSC), which supplied vessels for the transport of fuel later than the agreed time. A vessel bringing in 52,000 tons of petrol was to be provided for loading on January 2-4, but it arrived on January 10. Similarly, another vessel, which was due to arrive at the loading port on January 5, reached on January 15.
Officials of the petroleum ministry said besides the rise in demand the default on payments for furnace oil had also impacted PSO’s ability to import white oil products including petrol as the company was unable to open fresh letters of credit (LCs) before the clearance of outstanding payments. On an average, PSO imports four cargoes of petrol of 50,000 tons each every month. In January, however, only one cargo was imported on the 15th and another was expected to be imported at the end of the month.
PSO’s current receivables stand at approximately Rs200 billion. Out of the total, Rs176 billion is owed by the power sector.
The breakdown of receivables shows Wapda has to pay Rs99.3 billion, Hubco Rs57.9 billion, Kapco Rs13.6 billion, K-Electric Rs3.8 billion and Saba Electric and Southern Electric Rs579 million.
SOS letters were repeatedly written to the Ministry of Petroleum and Natural Resources as well as the Ministry of Water and Power outlining the PSO’s critical situation. The company defaulted on the payment of Rs46 billion against the LCs, which resulted in consumption of the company’s credit lines and overdraft limits. Consequently, banks cut PSO’s credit lines, which meant that the company was no longer able to open the LCs.
PSO sought the release of Rs74 billion on an urgent basis by December 31, 2014 to honour the commitments made to local and international suppliers. The state oil marketing company borne penalties of approximately Rs250 million on account of delayed payments to banks along with demurrage charges of $1.8 million and supplier’s claim of $6.4 million due to delay in opening the LCs.
PSO informed the government that due to delay in payments by the power sector, the company was unable to import fuel cargoes or continue supplies to the power sector.
On an average, PSO imports three to four cargoes of furnace oil of 65,000 tons each per month.
In January, no cargo of furnace oil was imported and only one cargo was brought in December. As PSO has no furnace oil stock, the government has issued directives that Hubco will now purchase furnace oil from Byco on advance payments with PSO acting as the middleman.
According to the directives, Hubco will make advance payments to PSO on a daily basis, which will be given to Byco for fuel purchases. On the receipt of payments, Byco will provide furnace oil for onward supply to Hubco.
Published in The Express Tribune, January 18th, 2015.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (16)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
@Rocky:
Sure, because it is the poor people who are the sufferer, not you & me.
@ishrat salim: PMLn is still the better alternate. Thats what we have to say:).
Shouldn't PSO's import problems be affecting the entire country? Why is the crisis only in Punjab?
@Gp65: I say this because the same modus operandi has been been used successfully in the past on other commodities and services.
@Gp65: why do you say the country doesnt have FX to pay for all its imports? At this point in time, there is no FX shortage, which is evidenced by the build up FX reserves to more acceptable levels and also a stronger Rupee. Even if there wasnt any FX available, oil is the most critical raw material for the economy and should have been prioritized. This is a shortage due to mismanagement and misplaced prorities. As far as the federral budget goes, the half year deficit is at 2.4% which is not that bad. pay now, increase consumption tax on petroleum products (or better yet, improve tax collections) but dont create a supply situation..
@Parvez: This is not an artificial shortage Parvez. Please read the article on fuel shortages by Khirram Hussain on Dawn. Alternatively goole "PSO default' and see what you come up with.
The country does not have forex to pay for all its imports and does ot have enough in its budget o pay for ongoing fuel subsidy given its other commiments. No matter how honest our political leader and from whichever party - unless they are willing to spend less on defense and more on people, he deep underlying issue will not be resolved.
This episode is a testimony to how incapable are these people.
So what, this is what you must expect from a disfunctional government governing a disfunctional society.
Where is SC ? why not taking suo moto notice on his important issue or are their vehicles running on air ?
Time for His Royal Highness Mian Muhammad Nawaz Sharif to take action or order for another 16/12 for diversion sake.
Its been done before.......Artificially create a shortage and then make money from correcting it.
Was it only dharna which to some extent kept them on their toes .... The know - all party
Previously Chinese Premier wouldnt come to Pakistan due to PTI's dharna... ++++++++++++++++++++++++++++++++++++++++++ Now he wouldnt come cause he is not willing to push his car.
now ! what do you have to say PML N supporters. While the oil prices are dropping & many countries are stocking up their reserve, we have run short of oil...what a joke ? PML N always talk big but are zero in performance...they are only interested in metros etc; not problems affecting general public....
Good governance
The Supreme Court should take suo motto notice of the situation and investigate whether the four dismissed officials are guilty of incompetence, dereliction of duty, corruption or a combination thereof. And as to why the Ministers of Finance and Petroleum ought not be removed from office?