ISLAMABAD, May 8: The petroleum ministry is worried that there would be no investment, local or foreign, in the oil marketing sector for quite a long time due to an adverse decision taken by the economic coordination committee (ECC) of the cabinet a few days back.

The ECC had rejected an investment offer of $500 million in the oil marketing sector from a Singapore-based company although the company met all the relevant standards and rules governing the petroleum marketing.

The company had proposed to run 15 outlets on its own throughout the country and pass on the dealers’ commission of four per cent to the consumers which could have resulted in Rs2 per liter reduction in retail price.

Background interviews with senior officials and documents provided to Dawn suggest that petroleum ministry was considering taking up the issue with the federal cabinet to rescind the ECC decision for an early damage control because the ECC decision had scared away the investors.

Finance Minister Shaukat Aziz had rejected, about ten days back, a summary of the petroleum ministry seeking permission to grant a marketing licence to a new company and stopped the ministry from further processing of any OMC licence till such time a new policy was in place.

Official record available with Dawn suggests that finance secretary had already given consent when the summary was first circulated before its submission to the ECC because the application by a Singapore-based company Admore Gas had fulfilled requirements of the petroleum policy, Pakistan Petroleum rules and the criteria approved by the petroleum ministry.

“The summary was circulated to the finance division, commerce division, CBR and Securities and Exchange Commission of Pakistan for their views. All have given their concurrence to the proposal”, wrote secretary petroleum M. Abdullah Yousaf.

The petroleum ministry said the companies had sought licence under Rules 26 & 27 of Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1971 to market POL products. The company proposed to market full range of POL products and Lubricants. It was to complete its infrastructure over a period of five years with a total cost of Rs1.660 billion.

“The induction of an additional marketing company will further generate healthy competition among the marketing companies and the customer’s services will be improved considerably besides an investment equal to $500 million and generation of employment in the country”, the petroleum ministry said in the summary to the economic coordination committee.

The officials are surprised as to why such an investment offer was rejected when their was no legal question barring a new entrant in the marketing field. “Further there will be no financial liability on GOP rather more revenue will be generated with the establishment of new company”, the petroleum ministry said.

“The proposal of M/S Admore Gas Limited has been examined in light of (the) criteria and found that it is in line with present Policy of the government (both petroleum policy and investment policy 1997) as it meets all the requirement of Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1971 and criteria developed by the oil industry except for storage development plan”.

As per criteria, the oil company is required to build 20 days storage cover of their sales while they propose 15 days. For this the company agreed to construct 20 days storage cover.

The officials said that finance minister was given wrong impression by heads of two leading multinational oil marketing companies due to the competition they were expecting as a result of direct oil sales by the Singapore-based company rather than through dealers.

When contacted, a spokesman for the finance ministry said the finance minister did not mean to shy away the investors and even the petroleum ministry had accepted that the said company lacked storage capacity.