Petrol blame game

July 01, 2020

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FEARS that the petrol crisis could trigger a damaging blame game within the government are now coming true. The government has tried to first blame the whole fiasco on the oil marketing companies, then blamed its predecessors for having bequeathed a ‘mafia’ to the country, and is now casting blame on the regulator for not having done enough through the crisis. The central fact at play is that the crisis has grown out of its inability to manage the supply chain at a time of great volatility in international oil prices. Fixing the mess will take more than one price revision. It will take sustained interface with industry, consumer groups, and those with expertise in global oil markets to reform the pricing mechanism to bring about two specific improvements. First is greater transparency, and the second is tighter integration between domestic and international prices. This is what is required to limit the space for manipulative behaviour. Instead, the energy and petroleum ministry seems to be casting about to find a villain in the whole affair.

The oil and gas regulator seems to be the latest in the line of fire coming from the ministry. All through the crisis, Ogra continuously pointed out the mismanagement that was taking place, and warned that an oil supply crisis could result from these decisions if course correction were not undertaken rapidly. Recently, the regulator detailed all its actions as well as the mismanagement of the ministry in a report submitted to the cabinet, which triggered an indignant response from the ministry. In its report, Ogra pointed specifically to the actions of the director general oil in the Petroleum Division, who took it upon himself to alter decisions that had already been made. It also drew attention to the ministry’s lumbering attempt to try and operate the oil supply chain via command, first by ordering oil marketing companies “to cancel their planned imports” on March 25, a ban that remained in place till April 26, and then by ordering two refineries to resume production to ensure diesel stocks for the harvest season. The ministry also tried to blame Ogra for not doing enough to ensure industry players maintain their required mandatory 20 days’ stock, but the regulator had a clear reply that this was the ministry’s own job. This latest round in the blame game will get us nowhere. The emphasis must be on reform, not blame.

Published in Dawn, July 1st, 2020