Khaleeq Nazar Kiani
The regulatory framework evolves with time depending on the relationship between government, industry, and civil society. The history of regulatory bodies in Pakistan is not worth praising, which has not sufficiently developed. Instead of controlling the risks and protecting the public from harm, they often budge to the pressure of the government and other external factors. Well-designed regulatory frameworks protect society from unacceptable risks. But how the regulatory framework is applied and implemented is important. The regulator has to be free of constraints from either government or private sector in exercising its authority except for those written in the law.
Just five years back, when the photovoltaic module price was going down globally, the NEPRA allowed Rs. 14.859 kWh levelised tariff for Quaid e Azam solar park (a government entity). The tariff was much higher than vogue in the world. It was a flagrant violation of public interest and expectations.
Last year in June, there was an unexpected shortage of petroleum products. The OMC hoarded the oil until the prices increased and gained massive profits. Lahore High Court directed the government to probe the matter. The government constituted an inquiry commission which has done commendable work in brief three months and pins down the wrongdoings, inefficiency rampant in the petroleum ministry. At first, the government was reluctant to release the report, but Lahore High Court made it public.
The report consists of 21 chapters and recommendations. The commission unveiled the ambiguity in the petroleum-related laws, the inefficiency of the Ministry of petroleum and its attached departments, the appointment of non-professional officers, issuance of illegal provisional licenses to oil marketing companies, unfair allocation of import quotas, violation of licensing conditions by oil marketing companies, outdated plants of refineries, and smuggling of oil products. In a nutshell, we see the disorganized petroleum sector.
The dodging of data and illegal practices by oil companies should be a matter of concern for the Security Exchange Commission of Pakistan as a regulator because few of them are traded in the Pakistan stock exchange. Small investors invest their hard-earned money in the companies by relying on these figures. Unfortunately, the regulatory role of SECP is not st-rong, and every company has its own code of business. Some companies rele-ase monthly production and sale figures, while others consider it classified and only publish it quarterly.
The commission report revealed that OGRA had issued 66 licenses for oil marketing companies, out of which 34 companies are active, while India, a big country, has only nine oil marketing companies. Ma-ny companies like HASC-OL, Gas & Oil Pakistan li-mited, Puma energy private limited, Byco, and Askar were found misreporting a-nd overreporting the oil su-pply. HASCOL Company reported a huge quantity of oil supply to far-flung areas like Timergra and lower Dir in KPK to claim primary freight under inland freight equalization margin (IFE-ML). Surprisingly the Fos-sil energy company was all-owed to import petrol without having a retail outlet.
Competition Commiss-ion of Pakistan and OGRA also fail to take cognizance of different OMCs’ interrelated interests, which is against the competition and OGRA rules. Vitol Dubai limited acquired the shares in the HASCOL and Gas & Oil Pakistan limited, while Fossil energy limited has shares in HASCOL. Marshal gas private limited has shares in HASCOL.
Byco Company is discussed in detail by the commission for its dubious business. Byco imported the crude oil vessel M.T.Rhea from UAE, but typical Iranian oil characteristics were found after testing. Byco challenged the test, and the case is in the High Court Sindh. So far, the government is silent and has not taken any action except to crackdown on smuggled oil.
The commission recommended the repeal of the OGRA ordinance with an Act of parliament. It is evident that the OGRA has grossly neglected its due role as a regulator, but the recommendation for the dissolution of OGRA as a regulatory body is not digestible. The public can not be left at the mercy of inefficient and incompetent government departments.
Mineral oil and natural gas are in the federal legislative list Part II of the constitution. Article 154 of the constitution provides the provinces’ role in the council of common interest. It is the mandate of the Council of Common Interest to formulate and regulate the policies in relation to matters in Part II of the federal legislative list.
With the insertion of Article 172 (3), the federal and respective provincial governments are now the joint owner of oil and gas produced in the country. There was a long-standing demand from Sindh, KPK, and Balochistan to revisit and amend the petroleum-related laws in the light of the 18th Amendment.
Directorate General Pet-roleum Concession regula-tes the upstream petroleum sector. OGRA is responsible for regulating the mid and downstream petroleum sector. Petroleum explor-ation and production policy 2012 defines the role and function of provincial participation in upstream regulation. It responds to the changes in the constitution and, to some extent, and acknowledged the incre-ased interest of provincial governments in regulation. It was the first step towards creating an independent up-stream regulator. Though CCI approved the policy a-nd set out both a mandate f-or the DGPC and provincial directors but the implementation is still required after the lapse of eight years.
The provinces have no say or participation in the country’s mid & downstream petroleum sector, which is against the spirit of the constitution. It is time to review the OGRA ordinance and determine where improvement to the ordinance will enhance the regulatory efficiency. Ann-ulment of the OGRA ordinance is not the solution. Instead, it should be streng-thened with provinces’ in-volvement directly in members’ appointments and hiring professional staff.
