ISLAMABAD A fresh scam in the oil supply chain surfaced on Thursday when the management of state-run Pakistan State Oil (PSO) officially confirmed that a powerful group in the company was involved in selling cheap oil to influential dealers ahead of monthly price adjustments to enable them to charge higher rates from consumers.

As the managing director of the country's largest oil supplier, Mr Irfan Qureshi, broke the news before the National Assembly's Standing Committee on Petroleum and Natural Resources, the committee's chairman, Shaikh Waqas Akram, demanded an inquiry and its report within a week to identify officials involved in manipulating the supply chain to the benefit of dealers.

Mr Qureshi told the committee that PSO officials were found providing petroleum products to dealers on credit at the end of each month in anticipation of an increase in prices to earn a windfall at the cost of PSO. He said two officials had been held accountable for being involved in the malpractices and an inquiry had been in progress since April.

He said the practice had been going on for years and had now been brought to an end. He said six officials at the Lalpir depot had been suspended for embezzling Rs100 million. He said whenever the PSO took action against corrupt officials, courts reinstated them.

The committee grilled the company's management for not taking action against Shahrukh Qaiser for his alleged involvement in financial embezzlement and said that he remained on the board of directors of a PSO subsidiary, Pakistan Grease Manufacturing Company, with 22 per cent shareholding.

Mr Waqas asked why he had not been taken to task despite the fact that two PSO members were sitting on the PGMC board. “We want to seen him behind bars,” he said.

On the issue of sub-standard fuel supplies to PSO, the PSO chief confirmed that a fuel supplier had provided a tanker of substandard fuel which was rejected after quality verification through physical tests.

He did not tell the committee that foreign suppliers had cancelled the contract to the local supplier, but it was restored at the intervention of a government functionary.

He, however, told the committee that a penalty was imposed on the supplier in accordance with agreement and a warning was issued that he would not be allowed to bid for further imports if he resorted to the same malpractice again.

In another case, the Karachi Port Trust (KPT) had imposed a ban on a ship for providing fuel mixed with water. The committee criticised the PSO for not blacklisting the supplier for substandard fuel supplies and limited itself to issuing a warning.

The committee raised doubts over misappropriation of welfare trust funds. Mr Qureshi said the PSO had a budget of Rs60 million for Corporate Social Responsibility (CSR). Some members of the committee criticised PSO for not extending CSR funds to welfare organisations of Balochistan and Khyber Pakhtunkhwa.

The committee asked the Petroleum Ministry to prepare a new policy regarding the CSR for welfare organisations.

The parliamentary body took serious notice of the nomination of directors of the PSO Board of Management and called for a policy for public representation on the board.

“We want a meeting with board members of PSO to verify their qualification and experience,” Shaikh Waqas said. He regretted that the board of directors did not play its role in improving PSO affairs.

The committee was also critical of not giving representation to Balochistan and Khyber Pakhtunkhwa on the PSO board. Mr Qureshi said that the director general of oil had proposed nominations for the PSO board of directors, but DG oil said he had not been consulted on nomination of board members. Petroleum Secretary Kamran Lashari said the DG oil only gave advice about board of directors.

The committee was informed that an inquiry had been initiated against Executive Director of Supply Naved Alam Zubairi for alleged financial embezzlement in Asia Petroleum Limited - a 40 per cent subsidiary of PSO. An explanation had been called and a two-member committee of the board of management was investigating the issue.

Mr Qureshi said that the APL audit committee had requested PSO to conduct audit for alleged embezzlement. The board of PSO has endorsed the request of APL audit committee and initiated an audit.

“The PSO audit team has established misappropriation and now ED supply has been directed to submit a reply within seven days,” the MD said.