Overreaction: PSO management board dissolved over petrol crisis

OGRA chairman suspended for three months after refusing to resign

ISLAMABAD:

In a move that is likely to only make matter much worse, the government on Wednesday decided to dissolve the entire management board of the state-owned Pakistan State Oil, the largest oil company in Pakistan, ostensibly over their alleged failure to prevent the petrol crisis in Punjab last month. The government also suspended Oil & Gas Regulatory Authority Chairman Saeed Ahmad Khan for three months for the same reason.

According to officials familiar with the matter, the government had originally sought the Ogra chairman’s resignation, but he refused to do so, saying that Ogra was not responsible for the crisis and hence he should not be made to resign. An inquiry committee headed by Zahid Muzaffar, the prime minister’s advisor on petroleum, held Ogra responsible for the crisis, a charge the Ogra chairman has repeatedly and publicly denied.

The committee stated that it was Ogra’s responsibility to ensure that there was at least a reserve of 20 days’ worth of oil supply at the nation’s oil companies. The Ogra chairman, however, says that responsibility falls to the petroleum ministry, not Ogra, and that the regulator was only responsible for helping ensure that the 20-day storage infrastructure was built, not for the maintenance of inventory. Saeed Ahmad Khan pointed out that it is the petroleum minister’s Director General Oil who meets with oil companies every month to review the state of their inventories.



And in another damaging move that is likely to only further exacerbate the energy crisis, the entire management board of PSO has been dissolved over their alleged responsibility for the petrol crisis, even though PSO officials had been repeatedly warning of the impending supply crunch.

PSO officials say they were unable to buy fuel for two reasons. Firstly, rampant electricity theft meant that power companies were not able to pay their fuel bills to PSO on time, causing PSO to default on its obligations to its international suppliers, who in turn cut off PSO’s fuel supply. And in December, Finance Minister Ishaq Dar personally intervened to prevent PSO from buying US dollars from the currency markets to make payments to international suppliers. Yet neither the water and power minister nor the finance minister have been held responsible.

On Tuesday, the government had suspended four senior officials of PSO, having already suspended its managing director, along with several petroleum ministry officials, last month.

Saeed Ahmad Khan is the second Ogra chairman to be forced to leave over the dilapidated state of affairs in the state-owned portion of the nation’s energy infrastructure. One of his predecessors, Tauqeer Sadiq, was also sent on forced leave by the Zardari Administration over his alleged involvement in a scam involving gas theft.

Multilateral donors have been urging Islamabad to make regulatory bodies autonomous, but most administrations often viewed them as useful political tools or else neglected arms of the federal government. At Ogra, for instance, a four member board now has only one serving member (for gas) after the chairman’s suspension.

According to officials familiar with the matter, there was uproar at PSO after the suspension of the management board. Some PSO officials are mulling over a plan of going on strike to protest the federal government’s actions. Officials said that PSO had contributed 49% of the petrol supply during the crisis situation despite its normal market share of 40%. They said that PSO had to bear the burden of other oil marketing companies (OMCs) that failed to maintain stocks due to dip in oil prices. But government had penalised several hardworking officials who had worked to try to resolve the crisis.

Published in The Express Tribune, February 12^th, 2015.