ONE more time a proposal is on the cards that would take the cost of state failure in particular areas and pass it on to the public. This is becoming standard in the power sector, where the practice is euphemistically called ‘full cost recovery’, and now it is being applied to the petroleum sector. For years, it has been a requirement for all oil-marketing companies to maintain stocks of up to 21 days so that the country could have a strategic reserve as well as synaptic protections in its petroleum supply chain to prevent mishaps like the 2015 petrol crisis. But the cost of maintaining such a reserve, which is standard practice in most countries, is very high and oil-marketing companies have been reluctant to invest their money in this priority, even though it is part of their licence obligation and the government has in the past opened up a revenue stream for the sector through the ‘deemed duty’.

But now that the former petroleum minister has become prime minister, we hear that the margins of oil-marketing companies could be revised upward, and a surcharge imposed on consumers to help generate the funds to build this reserve. This proposal must be resisted by all parliamentary parties as well as the media. It is not the consumer’s obligation to pay for this reserve, it is the marketing companies and refineries that have to share this cost. For years, the government tried to coax the marketing companies and refineries into complying, but failed. The matter even went to court, resulting in the famous Bhagwandas Commission report, which detailed the profits made by licensees while refusing to pay for the cost of the reserve. This urge, which seems to have become a reflex for the PML-N rulers, to pass on all costs of its failure to consumers must be defeated so that the government realises once and for all that there is no path forward except that of reform and strong governance.

Published in Dawn, August 18th, 2017