ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Tuesday provided a legal cover to Rs7.34 billion payments already made to Oil Marketing Companies (OMCs) as price differential claims (PDCs) for period 2007-12 on imported petrol.

The meeting presided over by Prime Minister Shahid Khaqan Abbasi also reviewed stock position of sugar and expressed satisfaction that about 4.4 million tonnes of the commodity were enough for over 10 months’ consumption, while next crushing season would be due in 6-7 months.

“The ECC accorded an ex-post facto approval for Rs7.34bn paid during previous years to OMCs against their PDCs” that was ‘duly verified and audited’. The payments were made to Shell and Pakistan State Oil (PSO) for import of petrol through open bidding during 2001-2007 and were not covered under the then prevailing petroleum pricing mechanism.

The Petroleum Division had moved the case for ex-post facto approval to adjust already released and pending amount of Rs10.8bn to OMCs. The Auditor General of Pakistan (AGP) had raised objections over the payments. The OMCs were required to sell petrol on the basis of ex-refinery price set by the cabinet while landed cost of petrol was slightly higher than ex-refinery rate.

Resultantly, PDCs accumulated to Rs11.23bn during 2007-2011. The ministries of Finance, Petroleum and Planning, etc keep fighting over the PDC refunds to OMCs, involving claims and counter claims that touched Rs18.5bn and repeatedly reached ECC.

Nevertheless, the Ministry of Finance allocated about Rs11bn which was endorsed by the ECC and cabinet in November 2010.

To get out of the continuous anomaly in the pricing, the petrol price was deregulated by ECC in August 2011. The Cabinet Division raised objections over the amounts and sought ex-post facto approval by the ECC for regularisation. The Petroleum Division claimed to have made payments to OMCs under admissible procedures while finance ministry demanded third party audit to verify all such claims for regularisation by the ECC.

Subsequently, the AGP conducted an special audit of both the ministries of Finance and Petroleum and then expanded the audit scope to 2003 to 2012 period. The regularisation of the matter kept delaying even though part payments had already been made.

Finally, the departmental audit committees involving AGP and the Petroleum Division in March 2017 reached an agreement to make necessary deductions on account of inadmissible incidental charges from the balance claim of PDC on imported petrol and get it regularised by ECC. An amount of Rs7.34bn was verified and cleared by the stakeholders and was approved by the ECC on Tuesday to regularise the payments.

Published in Dawn, May 9th, 2018