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Commission investigating Pakistan’s oil crisis calls for disbanding OGRA

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Commission investigating Pakistan’s oil crisis calls for disbanding OGRA

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What happened:

In a scathing 163 page report, the fifteen member inquiry commission probing Pakistan’s oil crisis called for the disbanding of the Oil and Gas Regulatory Authority of Pakistan (OGRA). The inquiry commission also recommended departmental proceedings against the top management of the petroleum division, as well as immediately halting the operations of, oil marketing company and refinery, Byco.

The report stated that the petroleum division’s decision to place a ban on petrol imports in March was wrong, both from a strategic and policy perspective. Prices, in March, were at a record low however the ban on imports denied Pakistan and Pakistani consumers from benefiting from these low prices. Despite the ban, oil marketing companies (OMC) were still operating in violation of it. In addition to which the petroleum division and the DG-Oil failed to make certain that OMCs lift quotas from local refineries, the OMCs refused to lift stock from February to April 2020. For this, the commission placed the majority of the blame on OGRA saying, “much of the mess that abounds in the oil industry pertains to Ogra and the related laws/rules”.

The inquiry commission also found OGRA at fault for the issuance of unlawful provisional marketing licences to the OMCs, not taking punitive action on illegal joint ventures or hospitalities among the OMCs and for not revoking or suspending the licence of even one delinquent OMC. Thus the commission “strongly recommends dissolution of Ogra through an act of parliament within six months”.

Reflecting on the performance and operation of OGRA the commission remarked that it felt “compelled to recommend” a performance audit of all the other regulatory bodies (National Electric Power Regulatory Authority, Pakistan Electronic Media Regulatory Authority, Competition Commission of Pakistan and Drug Regulatory Authority of Pakistan).

The report reveals that there was, approximately, Rs. 250 billion worth of oil smuggling from Iran. And it also found that the petroleum division (Ministry of Energy) played a part in Pakistan’s oil and energy crisis. The report stated, “The story of MEPD is also rife with apathy, incompetence flavoured with malpractices, and disregard to laws/rules”.

In their report the commission also strongly recommended penal and or departmental action against the DG-Oil, as he was found to have passed illegal orders for the allocation of both local and import quotas. The report also brought to light the role of one Mr. Imran Ali Abro, who was found to have been exerting significant influence on the affairs of the Ministry of Energy’s petroleum division despite not being employed there. “Strong departmental/penal action is also recommended against Imran Ali Abro and the other associates who had been maneuvering the unlawful affairs in the Petroleum Division”, stated the report.

The report also revealed that OMCs have been hoarding stock and manufactured an artificial shortage. The OMCs also failed to maintain a 20-day mandatory petrol stock due to insufficient storage capacity.

The commission also recommended that the operation of Byco’s refineries at Hub be immediately halted. They found that the company’s two refineries at Hub are non-operational, and questioned why these refineries were even allowed to be built and what purpose they’re currently serving.

The background:

According to the report, Byco’s owner and CEO Amer Abbasi is wanted by NAB for committing fraud of more than Rs.23 billion, as the company imported refined petroleum products in the garb of crude oil and cheated the government of the staggering sum. Abbasi had now entered into a plea bargain with NAB for a payment of a little more than Rs1bn. Commenting on this in the report the commission said, ““Apparently, the racket is still on”.

OGRA was created in 2002, but was only given actual power to regulate the oil industry in 2006. However, it took OGRA 14 years since its inception to finalise it rules, the Pakistan Oil Rules 2016. Despite the OGRA Ordinance of 2002, OGRA has been unable to enforce its rules and maintain even some control over the industry. The report stated that the, “role of this white elephant was not more than a silent spectator before or during the crisis of shortage of petroleum products”.

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