ISLAMABAD: The government’s revenue from the oil sector crossed one trillion rupees between 2001 and 2008, with the net profit of just one oil refinery rising by 3,516 per cent during the period 2007-08 compared to 2001-02, according to the Rana Bhagwandas Judicial Commission Report on oil pricing system.

After the Pakistan Refinery Ltd, which recorded the largest profit, came Attock Petroleum Ltd with its profit rising by 1,398 per cent during 2007-08, Shell Pakistan Ltd by 483 per cent, Pakistan State Oil Ltd by 440 per cent and Chevron Pakistan Ltd (formerly Caltex) by 170 per cent, reveals the 74-page report submitted before the Supreme Court, which will take up the matter on Thursday.

Among the refineries, Attock Refinery Ltd increased its profit by 830 per cent, National Oil Refinery Ltd by 768 per cent and Pak Arab Refinery Ltd by 567 per cent.

The oil marketing companies and refineries at times made windfall profits from their businesses, the report observed highlighting that many a times companies have made excessive profits on their inventories by reason of increase in prices in international and local market.

‘Whenever the prices of oil products go higher, their margins get inflated,’ the report said adding sometimes the profits were fair, genuine and reasonable despite luxurious style of life of the executives and the officers working in these companies.

It is high time that these companies rationalize and review their tremendous administrative expenses and create a role model for middle class of the society, the commission observed adding in fact they could develop an atmosphere of simple living and high thinking in the supreme national interest and for the welfare of the society. These measures on part of the government as well as companies would lead to a just and ideal Islamic society in the real sense of the term, the commission recommended.

It said the government made a blunder by allowing refineries to use the ‘Special Reserve’ for meeting future operating losses. ‘The funds were literally doled out to be plundered,’ it deplored adding intention in retaining resources created through special reserve in the business was to support the up-gradation programme. Setting-off operating losses from the special reserve means that the future profits could be freely distributed without first absorbing the losses incurred in previous years. In fact this special reserve should have been treated as a capital reserve and only to the extent of capital expenditure to be incurred on specific projects.

It stressed an urgent need to develop a formula for determining fair ex-refinery price because it is a complex issue and would need detailed deliberations amongst stakeholders.

The commission also mentioned the findings of former State Bank Governor Dr Isharat Hussain about the NAB enquiry on petroleum scam, in which NAB report was declared to be based on assumption and amounted to direct criticism on government policies.

It recommended the setting up of a committee of oil and emergency experts to develop a road map with a definite time frame towards free market, complete deregulation of all products and an open competition amongst refineries and distributors.

‘The policy of pampering and providing crutches to industry should be phased out as soon as possible and a time frame be given to refineries and OMC’s (oil marketing companies) to equip themselves to be a player in the open market,’ the commission recommended.

A committee of experts should be tasked to conceive and develop a Hydro Carbon vision in three to five years to streamline oil refinery and marketing sector leading to deregulation and asked to revisit the concessions allowed under the Petroleum Policy 1994 by bringing PARCO in line with other refineries.

On Inland Freight Equalization Margin (IFEM), the commission recommended a controlled deregulation and in the later phase the primary transportation charges be merged into OMC’s margins.

The commission felt the rate of recently introduced and now suspended carbon surcharge too excessive and exorbitant and suggested to make it fair and bearable.

The recommendations asked for fixing rate in absolute rupee terms per liter as against per centage in determining GST, OMC’s margin and dealer’s margin on per liter of petroleum products.

It also asked for capacity building of OGRA and the petroleum ministry establishing permanent institution to carry out research and develop a vision for an Integrated Energy Plan.

On CNG (compressed natural gas) the commission asked the concerned authorities to conduct random spot inspection of CNG stations twice in a year without charging additional inspection free from the dealers selling CNG at Rs48 when the actual cost is Rs17.

Referring to kerosene oil, the report said, any increase adds to the miseries of the people leaving them no option other than putting their stoves off. ‘The less-privileged and poor segment of the society is worst hit by recent increase in kerosene oil price,’ it said and recommended that OMC’s should market kerosene oil under a system and develop dispensing units with adequate monitoring arrangements that will also save the end user from being fleeced by the middlemen.

On LPG (liquefied petroleum gas) the commission suggested to withdraw 16 per cent GST levied on the import of LPG to create equilibrium between the supply and demand factor especially in winter season when the demand increases and the prices in the international market go higher.