Oil industry association criticizes government’s decision to award exclusive diesel import rights to PSO
Published on: January 20, 2024.
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A group of oil marketing companies in Pakistan is opposing a government decision that would give Pakistan State Oil (PSO) the exclusive right to import high-speed diesel (HSD). The Oil Marketing Association of Pakistan (OMAP), which represents emerging companies in the sector, argues that this move would create a monopoly for PSO and hinder competitiveness and innovation in the oil industry.
In a letter to the petroleum secretary, OMAP expressed concerns about fair competition and market dynamics. The association believes that granting sole import authority to PSO would stifle the independent workability of other oil marketing companies (OMCs) and negatively impact the industry’s competitive landscape. OMAP emphasized the importance of maintaining a level playing field to encourage healthy competition, foster innovation, and ensure optimal service delivery to consumers.
The association criticized the government’s decision for undermining the principles of a free-market economy and ignoring the potential for collaboration and healthy competition among OMCs to better serve the nation. OMAP argued that a monopoly would provide PSO with unfair advantages in terms of pricing, settlement of LC (letter of credit), and other trade-related benefits.
OMAP urged the Oil and Gas Regulatory Authority (OGRA) to reconsider the decision and actively engage all stakeholders in formulating a framework that promotes inclusivity and ensures the participation of all OMCs in HSD importation. The association highlighted the need to strike a balance that benefits the industry economically while upholding the principles of fair competition and equal opportunity.
In response to the government’s proposal, the regulator sought suggestions from the oil marketing sector. Industry officials explained that PSO currently imports 90% of the HSD, with the remaining 10% imported by other OMCs. Importing the entire HSD through PSO would help meet demand and address the concerns and reservations of other OMCs. These companies have been complaining about the domestic price of HSD, which is based on PSO’s import and its premium and exchange rate adjustment.
It is worth noting that Pakistan relies on imports to meet its domestic HSD demand as local refineries cannot produce enough to fulfill the country’s needs.
Source: The News
