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NAB investigates dumping of petroleum products

ISLAMABAD — The growing prices of petroleum products and their dumping by the petroleum companies have caused billions of rupees losses to the national kitty and the issue is being investigating by the National Accountability Bureau (NAB).

Informed sources told said that the NAB is currently questioning a number of petroleum ministry officials as to how the pricing of petroleum products was not transferred to the Oil & Gas Regulatory Authority (Ogra) for the last three years despite a binding decision of the federal cabinet presided over by President General Pervez Musharraf in June 2001.

The NAB, said these sources, was also looking into circumstances that led to closure in December 2004 of second phase of an enquiry into dumping of petroleum products for more than five years by the petroleum companies, although misuse of freight pool and avoidance of sales tax payment had been proved and responsible people identified by a committee in the first phase of enquiry.

The NAB has obtained the relevant record of petroleum ministry and is currently scrutinising it, a NAB source said. The sources said the federal cabinet had decided on June 13, 2001 that pricing of POL products would be handed over to the Ogra on its coming into operation. However, this was not done despite the fact that Ogra was established in March 2002. A number of other relaxations allowed to the refining sector for three years ending 2003 for improvement of infrastructure continued unabated. These sources said the exact amount of losses caused to the national exchequers would run into hundreds of billions of rupees over the last six years.

The petroleum ministry, said these sources, has been asked to justify as to who and why allowed the inclusion of Petroleum Development Levy (PDL) in base price for calculation purposes for marketing margins and retailer margins.

The ministry would also have to explain if there was precedent anywhere in the world where profit of an oil distribution company is calculated after inclusion of taxation in the price.

The NAB is also examining as to how the pricing of motor spirit was being done on the basis of naphtha instead of motor spirit and why the pricing of this product based on import parity price although the country was self-sufficient in this particular area.

The ministry has also been asked to justify how the companies were allowed to charge premium on products which did not fall in the category of premium quality. Under the preliminary estimates, the NAB believed the profits of petroleum marketing companies and refineries increased by upto 500 per cent due to these technicalities and inventories while the ministry looked the other way.

These sources said the NAB has also exchanged views with the Ogra high ups on the subject and the steps the regulator was planning to improve the situation when it starts price fixation from April 15, 2006. However, it would be interesting to know that NAB officials, who had earlier initiated an inquiry against the sugar mills owners for allegedly having made Rs40-50 billion in just few months by increasing the prices of the commodity, have shelved their inquiry due to the influence of the sugar cartel.

The prices of sugar have gone up from Rs24 Kg to Rs 42 per Kg during the last few months. It was now being feared that these prices will further go up as there was no check on them by the concerned government departments.

"So is the case with cement manufacturers who have increased from Rs300 to Rs390 per bag of cement during the last few weeks", a source said regretting that a common man was facing hardships due to sky rocketing of prices. However, he said that the present government was earning a bad name due to its failure in containing the prices in the country.