Fuelling controversy

Published January 20, 2015
Citizens are in queue to get petrol as commuters in Rawalpindi face hardship due to a severe dearth of petrol at most fuel stations.PPI
Citizens are in queue to get petrol as commuters in Rawalpindi face hardship due to a severe dearth of petrol at most fuel stations.PPI

A FLUSTERED and beleaguered finance minister suggested in his first public appearance since returning from his visit to Japan that the critical fuel shortages in Punjab might be a conspiracy against his government.

On his part, the petroleum minister, who has been doing the rounds on TV since last week, blamed variously the finance ministry for not releasing funds in time to retire outstanding payments on oil imports, a spike in demand for oil, and refinery shutdowns.

Four heads have already rolled, although none at the highest level. Meanwhile, consumers continue to throng the petrol pumps filling up small containers with tiny amounts of petrol as the fuel is rationed by pump owners, and a black market thrives.

Also read: PM suspends officials over fuel crisis as anger escalates

Of all the damaging attitudes to bring to the table at this juncture, none can be worse than casting the whole affair as a conspiracy against the government. Not everything that happens in the country is politically motivated.

The sequence of events that led up to the shortages is quite obvious by now, and it is disingenuous on the finance minister’s part to try and shrug off responsibility. It has been observed that most major decisions of this government are taken by Prime Minister Nawaz Sharif and Finance Minister Ishaq Dar, who are often criticised for concentrating power in their own hands.

Since a large part of the crisis grows out of the funding requirements of PSO, which found itself unplugged from its credit lines due to defaults in payments of furnace oil imports, at least some of the explaining must come from the finance ministry.

Managing the oil supply chain is tricky business and requires advance planning — especially since Karachi, where the imports land, has limited storage capacity for petrol. Managing the supplies becomes difficult if the company placing the order does not know whether it will have the funds to honour the payment, especially as suppliers are demanding money before a vessel is loaded.

Vessels have transit time, berthing is often not available on demand, and discharging the fuel for upcountry transportation can take days. It becomes impossible to manage such a supply chain if one doesn’t know when the necessary funds to make payments will be available.

As a result, oil supplies are routinely being arranged through short-term emergency measures for every vessel, which brings additional costs as well as delays in berthing and discharging of the fuel. The government will need to take a serious look at how it is running things for a more mature answer to why this situation arose in the first place.

Over-centralisation of decision-making in the hands of a small group of individuals, coupled with inept management of the consequences growing out of the circular debt, has created this crisis. Resorting to conspiracy theories must be avoided.

Published in Dawn, January 20th, 2015

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