ISLAMABAD: More than two dozen smaller oil marketing companies (OMCs) claim to have suffered massive losses due to unfair petroleum pricing and marketing conditions and lashed out at the Oil and Gas Regulatory Authority (Ogra) for its inability to ensure a coherent regulatory environment, causing existential crisis for them.

“The entire industry, barring state-run Pakistan State Oil (PSO), is facing existential crisis and this is mainly driven by lack of coherent policy by Ogra,” the Oil Marketing Association of Pakistan (OMAP), representing more than two dozen smaller OMCs, said in a letter to Ogra Chairman Masroor Khan.

It said Ogra was required to ensure that all players of the industry get a level playing field, but the industry had been miserably failed by the regulator which has “consistently failed to settle foreign exchange losses adjustment, negative inland freight equalisation margin, pricing, oil companies’ margin revision and other related issues”.

The OMAP particularly protested “unfair and unjustified working and distribution of foreign exchange losses” to the oil marketing companies. It accused the Ogra chairman of having “clear bias towards the big players which is not only unfair but also goes against the very purpose of your organisation”.

These entities reportedly claimed around Rs25 billion in overall losses owing to insufficient coverage of foreign exchange adjustment in pricing and alleged that undue favour was being given to larger players, particularly those operating in the public sector.

Ogra denies allegations

A spokesperson for Ogra said such allegations were strictly non-factual. In a written statement, he said the regulator, along with the federal government, was following the approved policy guidelines to address variation in cost. “Under the policy guidelines, PSO’s import cost is actualised upon the retirement of letters of credit and the differential is loaded in the subsequent prices by the federal government with a view to passing on the actual cost to oil marketing companies and general consumers of Pakistan.”

The regulator said the prices are fixed every fortnight by the federal government and announced by the finance ministry in consultation with the petroleum ministry and Ogra, hence “any change in policy is the exclusive domain of the federal government”.

Separately, the regulator wrote to the federal government last week that the industry had highlighted various grievances over the mechanism of exchange rate adjustment in oil pricing and wanted review of the policy framework. Ogra wanted these concerns to be addressed considering its potential impact on the national oil value chain.

On the other hand, the OMAP believed that Ogra’s inaction on these matters was causing great distress to the emerging OMCs that are struggling to compete with the established players in the market. “The record is evident that OMAP is repeatedly knocking doors of Ogra and petroleum ministry to adopt an efficient mechanism for FX (foreign exchange) losses disbursement to ensure that each penny of national money goes to the true and eligible entities…,” it wrote.

Published in Dawn, May 23rd, 2023