The implicit reliance on the government by some businesses — assumed in the shape of a bailout during times of distress — often turns out to be misplaced, particularly when the problem is self-created and not an outcome of adverse economic conditions or wrong official policies.

However, there is a case for looking into the deteriorating economic environment for manufacturing and the industry’s general complaint that the government tends to promote trading or speculative activities at the cost of manufacturing, which has led to de-industrialistion over the past few decades.

Byco Industries Incorporated (BII) — an integrated oil company set up with an investment of $500m — is in distress. It attributes its problems partially to the government and seeks its help in order to ride through its cash flow issues.

The hierarchy in the ministry of petroleum and natural resources acknowledges the company’s potential, but said nothing to suggest that any bailout is even being considered by the government at this point of time.

“They keep on sending claims. However, their demands to arrange cash flows from the government are not justified,” Naeem Malik, a petroleum ministry spokesperson, told Dawn over telephone from Islamabad.

“Byco’s performance has improved over the past year. All it needs is to aggressively focus on arranging cash flows from the market to ensure a steady supply of crude to its refinery, meet its market commitments and emerge as a dependable source of supply of oil products,” he added.

The oil company, however, is not comfortable with that stance, and believes that the government accommodates the interests of oil marketing companies (OMCs) at the cost of refiners.

In a one-to-one dialogue with this scribe, Amir Abbassciy, CEO of BII, asserted that local refineries have the capacity to match the country’s energy demand. “Yes, we need to import crude oil, but I see no justification for importing products that can be produced locally.”

“The circular debt primarily propels the problems that lead to higher dependence on imported products, leaving local refineries to operate below capacity,” he said.

Mentioning the case of his own company, he said: “PSO agreed to lift 40,000 metric tonnes of high-speed diesel (HSD), 15,000 metric tonnes of high-sulfur fuel oil (HSFO) and 6,000 metric tonnes of MS per month earlier this year. So far, they have lifted only 5,000 metric tonnes, citing cash flow and working capital constrains. Hence, the OMC’s inability to fulfill its commitment to lift available stocks is not Byco’s failing, but we will endure the consequences”.

The reaction of other big players in the oil business towards Byco has been hostile. “It is not right to cast aspersions on the government, which has evolved a transparent and dependable mechanism to decide both the quantum and sources for import of crude and oil products,” commented a top executive of a refinery who holds a position on the Oil Companies Advisory Council (OCAC).

“The product review meeting is held every month where all stakeholders are represented. The projection of demand and supply in each product category is made, and as per the law, only the deficit is allowed to be imported. Even the imports are secured through a transparent bidding process,” he said while defending the government.

“Currently, the total domestic demand of oil products in Pakistan is projected at around 21m metric tonnes. Local refineries produce 9.5m metric tonnes, and about 11.5-12m metric tonnes have to be imported. Fuel oil and HSD constitute about 80pc of the total oil product demand. Petrol adds up to another 15pc, and all other products contribute to the 5pc,” a petroleum ministry source shared the data over phone.

Another major player in the oil business brought the credibility of the complaining company in question.

“The oil marketing companies are reluctant to deal with Byco because it defaults on its commitments. It is a competitive market, where reputation and credibility matter. Instead of looking for culprits outside the organisation, the management needs to internally fix its technical and operational problems to succeed,” he gave his opinion.

“The overriding mandate of the petroleum ministry is to ensure the steady nationwide supply of oil products, considered to be the lifeline for an economy. The interest of a private party can’t precede the interest of the country,” he asserted.

Byco dismissed the view. “There is no substance in the criticism. Byco has regularly been meeting market commitments. We enjoy a comfortable relationship with OMCs like Shell Pakistan Ltd, Chevron Pakistan Ltd, Total and other smaller OMCs. The problem is only with PSO, which abuses its monopolistic position in the market,” the company said in a written response.

“There are 16 registered OMCs in the country. Currently, hardly seven are operative. Byco should try and increase its production, forget PSO, and deal with others that are desperate for business,” advised an expert.

A comment from Shahid Khaqan Abbasi, the petroleum minister, did not arrive till the filing of this report.

Another key member of the economic team said, “We want companies to grow and flourish, as the PML-N believes that the fortunes of Pakistan and its people are tied to the performance of businesses in the country. It is, however, absurd to assume that the government can or should provide a blanket guarantee of profit to the private sector”.

Some experts suggest it would serve the goal of economic uplift if the government devolves economic decision-making. “If ministries are empowered, the quality of economic governance can improve through on-the-spot, prompt actions.”

Published in Dawn, Economic & Business, November 24th, 2014