'Independent auditor' to examine OMCs claims

ISLAMABAD — Pakistan government has decided to appoint an 'independent auditor' to examine the authenticity of about Rs6 billion payment being made per month as price differential claims (PDCs) to the oil marketing companies (OMCs) and refineries out of public kitty.

By From A Correspondent

Published: Thu 17 Aug 2006, 9:16 AM

Last updated: Sat 4 Apr 2015, 2:17 PM

Informed sources said that the decision was taken on the recommendations of the National Accountability Bureau (NAB) that has been investigating into the alleged wrongdoings into the oil pricing mechanism over the last six years. The government is currently in the process of appointing an auditor of international repute and is soliciting proposals in this regard.

These sources said the NAB has identified a number of 'grey areas' in the oil pricing and have suggested special audits and further verification of facts and figures before instituting criminal proceedings against those involved in the oil price manipulation. In one case, the NAB has flagged about Rs50 billion for further examination.

"The NAB has also indicated a couple of authorities who might be proceeded against, subject to approval at the top," an official said who claimed to have gone through the report.

Meanwhile, a delegation of the Oil Companies Advisory Committee (OCAC) comprising representatives of three leading companies — Shell, Pakistan State Oil and Caltex — held another round of meetings with Adviser to the Prime Minister on Energy Mukhtar Ahmad and demanded immediate release of Rs19 billion in PDC that has piled up over the last few months as a result of freeze on petroleum prices.

A source in the OCAC said the OMCs did not oppose the audit but informed the adviser that they were defaulting in payments to the refineries and a chain reaction would snowball into disruption in oil supplies very shortly.

He said the adviser assured the delegation that Prime Minister Shaukat Aziz had issued directives to work out a plan to ease out financial difficulties of the oil companies without any prejudice to the planned audit. The OMCs would start getting payments from the government by next week and would be subject to adjustment according to findings of the audit, the sources said.

The sources said the NAB was unclear as to in what circumstances a special commercial audit that was recommended by petroleum minister Amanullah Khan Jadoon to be conducted by the Auditor General of Pakistan (AGP) could not proceed. The petroleum minister had recommended to refer to AGP through proper channel to conduct a five-year special commercial audit of the oil pricing thoroughly by looking into record of petroleum ministry and public and private sector oil marketing companies and refineries. This could not materialise.

The commercial audit, said NAB, might have determined whether or not the oil companies had manipulated the oil prices to their advantage or they had followed the formula provided by the petroleum ministry in letter and spirit.

The petroleum ministry, said these sources, has responded in writing to a NAB questionnaire and took the stand that the policy of oil price deregulation was approved by the then chief executive Pervez Musharraf in 2001. A subsequent price calculation mechanism was also approved by a meeting of the then federal cabinet.

The policy and the calculation formula were implemented by the OCAC in letter and spirit. The petroleum ministry had also taken the position that it used to take the finance ministry into confidence on each quarterly price revision calculated by the OCAC. Hence, the whole deregulation policy and oil pricing was a collective responsibility of the government and petroleum ministry officials could not be singled out if at all there was any discrepancy.

The main summary contended that light crude oil prices had touched highest level of $60.5 per barrel in August 2005 and high speed diesel peaked at $68 per barrel. On the contrary, an annexure of the same summary revealed that light crude oil in the Arabian Gulf had never crossed $42.6 per barrel and HSD prices peaked at $53.92 per barrel in August 2005.

The sources said the NAB wanted further probe to ascertain whether Rs22 billion paid to OCAC members as price differential claim was based on prudent cost estimates and how a $15-20 per barrel difference was recorded by the petroleum ministry.

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