Inside Financial Markets

Pumps mixing KO in petrol, diesel to Maximise Profits

A parliamentary panel was informed by the officials of Pakistan State Oil (PSO) on Monday that petrol pump owners are mixing kerosene oil (KO) in petrol and high speed diesel (HSD) to maximise their profits. This was revealed to the Senate sub-committee on petroleum and natural resources, which met here under the chairmanship of Senator Taj Muhammad Afridi.

The meeting sought detailed reports from Oil and Gas Regulatory Authority (OGRA) and Oil Marketing Companies (OMCs) containing action taken against petrol pumps tampering with measurement and selling substandard fuel. The panel has concluded its recommendations and will submit its final report on the problems faced by the oil sector with the Senate standing committee on petroleum.

The officials of the state-owned PSO acknowledged the sale of adulterated POL products in the market and said that kerosene oil is being mixed in gasoline (petrol) and high speed diesel. The PSO officials said if kerosene oil prices are increased, the adulteration practice can be checked as price of kerosene oil is at least Rs 20 per litre lower as compared with petrol and Rs 25 as compared with HSD prices. The committee snubbed PSO and OGRA officials, saying if increase in kerosene oil is the only solution to the problem then why national resources are being wasted on entities like PSO and OGRA.

The committee held discussion on a petition filed by two individuals Maqsood Ahmed Awan and Munawar Khan regarding problems being faced by the oil sector. The committee also expressed concern that working papers for the committee meetings are not provided to parliamentarians in time and warned to avoid such practice in future.

The OGRA officials informed the committee that under OGRA rules no oil company can operate without building storage capacity; however, the ministry of petroleum is allowing the companies to operate without the storage. Regarding the storage issue, the OGRA informed that after the issuance of licence, the OMC has to construct oil storage within three years and the government is making rules in this regard. The ministry of petroleum is responsible for the enforcement of the rules and regulations. It was informed that several marketing companies were allowed to operate sans storages and OMCs are receiving illegal Inland Freight Equalisation Margin (IFEM).

The OGRA further informed that 10 oil marketing companies were fined Rs 30 million for operating without storages. Similarly nine oil marketing companies were fined Rs 26 million for opening petrol pumps without permission. Action was taken against Asker Petroleum and Zoom Oil for opening petrol stations without permission but they have obtained stay from the court.

The committee thoroughly discussed the IFEM, under which special tariff was charged for far-flung areas but the supply was delivered to nearby petrol pumps or dumped at illegal petrol pumps. The IFEM is the transportation cost from the refinery/ port to the oil depots and storage facilities with no profit element for OMCs. Expressing concern, Chairman Taj Muhammad Afridi observed that there should be an effective system of physical verification of oil depots and petrol pumps to curb any dumping. He underlined the need for an effective mechanism of checking quality and quantity of oil being sold at the dealers’ outlets.

Representatives of OGRA, OMCs and PSO apprised the committee that they have a mechanism to regularly check the quality and quantity of fuel being sold at petrol pumps, but could not give details like amount of fines imposed on how many petrol pumps in a certain period.

Representatives of PSO and Shell Pakistan said all oil tankers working with their companies had got installed tracking devices and there was no question of abuse of Inland Freight Equalisation Margin (IFEM) on their part. Senators Baz Muhammad Khan and Mir Muhammad Yousaf Badini, representatives of PSO, OGRA, National Electric Power Regulatory Authority, Oil Companies Advisory Council, different OMCs and petitioners attended the meeting.

Baqar Hussain

A Wannabe CFO, just had stepped in the corporate sector, willing to explore every aspect here and learn as mush as i can, awareness for those who dont, get the info where ever possible and stay up to date always.

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)