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Citizens oil woes

The editorials of one of the English newspapers framed it aptly: Oil's well that doesn't end well. 1 All is definitely not well with the oil prices from the perspective of the consumer. There have been some protests over this issue as the price hike of oil not only hits the consumers directly but it also raises the prices of transportation and other household commodities. Thus, consumers are affected by rising oil prices directly and indirectly.

During the past summer, while the international oil prices were rising, the Government of Pakistan decided to subsidize the cost to the consumers. The consumers are being charged for this subsidy now when international oil prices have decreased by twenty percent but in Pakistan prices have actually risen.

To give one example in the international market, OPEC's price fell by 18 percent by December 2005; while in Pakistan the Oil Companies Advisory Committee (OCAC) increased the price of High Octane Blending Component by more than seven percent. In Jan 2006, the Supreme Court of Pakistan will hear two constitutional petitions against the oil price hike and the existing mechanism for determining prices.

Individualland feels that it is important that before the hearings, citizens know what the real issues involved are and to act accordingly. Conflict of Interest

The oil prices in Pakistan are presently regulated by the Oil Companies Advisory Committee (OCAC) which has ten members. In December 1999, through a letter (No 1727/DS. D-3/99) the Chief Executive Secretariat approved the names and composition of this Committee and on June 29th 2001 the notification was published in the Gazette of Pakistan through a letter issued by the Ministry of Petroleum and Natural Resources. These members are Shell, Caltex, Pakistan State Oil, Attock Petroleum, TOTAL, Biscor, Attock Refinery, National Refinery, Pak-Arab Refinery and Pakistan Refinery. As the well known names of the companies involved signifies, all the ten members who are responsible for regulating the oil prices are actually beneficiaries themselves. Thereby a clear conflict of interest and a violation of the Monopolies and Restrictive Trade Practices (Control and Prevention Ordinance, 1970.)

The World Bank in its report (No 26072-PK) of July 2003 also `"expressed legitimate fears that prices are manipulated by the industry to generate risk-free profits at consumers expense." On October 13 th 2005, none other than the Attorney General of Pakistan while referring to Article 90 of the Constitution declared that "The Constitutionality of the delegation to the OCAC is, questionable"

In addition to this obvious conflict of interest and violation of the constitution as well as the Monopolies and Restrictive Trade Ordnance, of the regulators being the beneficiaries, there have also been a number of illegal appointments such as:

> Mr. Feroz Cowasjee, a regular employee of Shell Pakistan was appointed as the Secretary General of OCAC for three years. Later, Mr. Feroz Cowasjee was appointed to PARCO as DMD Finance.
>It is important to mention that the present Secretary General of OCAC, Mr. Abid Saeed Ibrahim is also an ex-employee of Shell Pakistan and thus has close links with the company.
In addition to regulating prices, in June 2001, the OCAC was also given the reponsilbity of the Freight pool management. How the OCAC fared in executing this responsibility can be gauged from the fact that in 2000-1 the POL movement was Rs 500 million whereas in 2004-5 it is Rs 9.1 billion. It is important to mention that the National Logistical Cell (NLC) has been notified/appointed as the sole">

The World Bank Pakistan's Oil and Gas Sector Review 2003 also declared that "a clear US$ 7 per bbl or US $59.62 per ton lift was created as soon as OCAC got control." Citizens should also know that OCAC was importing from the members' mother companies i.e. KPC for PSO, Shell International for Shell Pakistan and Caltex for Caltex Pakistan.

Individualland would also like to mention that according to its sources, a number of tenders were awarded by the OCAC members to their mother companies and thus tendering was not done in a transparent and accountable manner.

Questions from the Citizens

On the basis of these facts, we, the citizens would like to know:

> How the beneficiaries were also made the regulators of oil prices? On what basis were they chosen what criteria was used?

> Why were repeated concerns from various quarters such as the Attorney General, the Parliamentarians and the World Bank against this conflict of interest ignored?

> Who allowed payment of freight for carrying crude oil from Badin to Rawalpindi for ARL which is a private refinery? The cost was directly passed on to Pakistani citizens. On what grounds was this decision made? Was any tender sought before awarding this contract to ARL?

> Who allowed relocation of a 60 year old refinery Bosicor and its produce uplift by Pakistan State Oil? Again the cost was borne by the Pakistani citizens as Pakistan State Oil is a public company.

> Why PARCO was allowed multi-billion dollar expansions in this era of privatizations? On what basis? Were the tenders issued etc?


On the basis of these facts, citizens, through individualland would like to demand that the complete record of OCAC should be seized and an impartial body be established to investigate this matter.

Note: Individual-land has copies of the petitions filed in the Supreme Court as well as other documents to substantiate this e-input. Individual-land would be happy to provide more detailed information if needed. Please feel free to contact us in this regard.

1 Daily Times, Dec 20th 2005
 

 

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