Oil association opposes govt’s decision to grant PSO sole diesel import rights

KARACHI: A group of oil marketing companies is opposing a government decision to give Pakistan State Oil (PSO), the country's largest fuel supplier, the sole right to import high-speed diesel (HSD).

The move would create a monopoly for the state-owned PSO and hurt the competitiveness and innovation of the oil sector, the Oil Marketing Association of Pakistan (OMAP), which represents the emerging companies, said in a letter to the petroleum secretary.

“The move to allow PSO the sole authority for importing HSD raises serious concerns about fair competition and market dynamics. We firmly believe that such a decision would create a monopoly for PSO, stifling the independent workability of other OMCs and adversely affecting the competitive landscape of the industry," the letter said.

"It is essential to preserve a level playing field that encourages healthy competition, fostering innovation, and ensuring optimal service delivery to consumers." The government’s intention to streamline the import process and enhance economic and operational efficiency is commendable, but granting exclusive import rights to PSO is not the solution, the association said.

“This decision not only undermines the principles of a free-market economy but also disregards the potential for collaboration and healthy competition among OMCs to better serve the nation.”

The OMAP said the purported benefits of this arrangement, as outlined in the official document, fail to address the broader implications of concentrating such a critical aspect of the oil industry in the hands of a single entity.

"A monopoly would inevitably lead to an unfair advantage for PSO in terms of pricing, settlement of LC, and other trade-related advantages, to the detriment of smaller OMCs." The association urged the Oil and Gas Regulatory Authority (OGRA) to reconsider this decision and actively engage all stakeholders in formulating a framework that promotes inclusivity and ensures the participation of all OMCs in the importation of HSD.

“It is imperative to strike a balance that not only benefits the industry economically but also upholds the principles of fair competition and equal opportunity." It said that the OGRA will prioritise the interests of the entire oil marketing sector and work towards a solution that fosters a competitive and dynamic marketplace. "Our industry's success depends on a fair and transparent regulatory environment, and we look forward to your commitment to preserving these principles."

The regulator had sought suggestions from the oil marketing sector about the exclusive rights of Pakistan State Oil to import high-speed diesel last week, after the petroleum division agreed to the proposal of the state-owned company, which sought exclusive rights to import the fuel.

Oil industry officials said the PSO imports HSD from Kuwait Petroleum Corporation (KPC) under a government-to-government arrangement and has the advantage on premium and settlement of LC for its import.

Although ninety percent of HSD is still being imported by PSO and the remaining ten percent by other OMCs, the import of the entire HSD by PSO would help not only in meeting the demand, but also settle the concerns and reservations of OMCs, which complain about the domestic price of HSD based on PSO import and adjustment of PSO’s premium and exchange rate, they added.

Premium is the amount that is paid over or below the market price of a petroleum product, depending on the demand. If the demand of a particular product is higher than the market rate, the price is paid over the market rate and if the demand is low, then suppliers often sell it below the actual rate to dispose of the stock. Pakistan imports HSD to meet its domestic demand as local refineries don’t produce enough to cater to the domestic need fully.