Wednesday, 28 January 2015
A consensus is emerging that the Nawaz Sharif administration has remained focused on fighting fires that nine times out of ten received the accelerant from within the ruling party itself. In the case of the petrol crisis the accelerant was provided by the Ministry of Petroleum and Natural Resources for not taking account of the rise in gasoline demand due to (i) the shut down of CNG stations in Punjab; (ii) decline in the international petrol price that was passed on domestically; (iii) panic buying once petrol stations began to run out of fuel; and (iv) the oil marketing companies' reluctance to keep the 20-day inventories as per contract as it was leading to losses on inventory in spite of the in-built profit margin in the contract. Supply remained compromised because of the failure of the Ministry of Water and Power to improve performance by either reducing (i) receivables that account for a 300 plus billion rupees circular debt leading to Pakistan State Oil liquidity issues that disabled it from opening letters of credit, (ii) transmission and distribution losses. In addition, the shut-down of Parco refinery due to technical reasons exacerbated the shortage. And finally the Ministry of Finance is to be held responsible because it commits to reforms in the power sector to the International Monetary Fund without taking the ground realities into account namely the federal adjustor remains a pipe dream due to provincial resistance, the increasing private sector receivables and failure to take note of the rising receivables that account for an unrealistic budgeted subsidy targets.