PSO bidders seek PC indemnity in light of CCI verdict

Some bidders are seeking indemnity from the Privatisation Commission (PC) as they feel that the Council of Common Interests (CCI) had cleared Pakistan State Oil (PSO) for sell-off to the private sector, but with the condition of disbundling the oil marketing company ie the storage facility and the network of retail outlets.
They said that in case the PC went ahead with its planned sale then the government should indemnify them against any loss, if the courts blocked the transaction, as happened in the case of Pakistan Steel Mills Corporations (PSMC).
PC is said to be ignorant of CCI decision regarding PSO on the one hand, and on the other, it has incorporated all the directives, given by the Supreme Court in Pakistan Steel case, in PSO transaction without applying its mind that some of them do not have any bearing on PSO transaction, such as the inclusion of price of land.
Unbundling of the oil marketing company could ensure that PSO storage, as a separate entity, could be availed by other marketing companies, and take care of fears of emerging as a private monopoly in post-privatisation scenario, and that its new buyers did not exploit the market to get any undue benefit of major share of the oil market.
PSO holds around 68 percent share of Pakistan''s oil distribution. So, its storage facility gives it an advantage over its competitors. Over the years, the government had been pressing the private sector oil companies to expand their storage facility. They, in turn, argued that building up of storage facility needed huge investment and the margin allowed to them under the government''s price fixation formula did not provide the cushion to do so. But PSO, being government managed entity, did the government bidding and deployed its profits into storage build-up.
The qualified bidders once again raised the same issues at PSO pre-bid meeting, held on June 20, as done earlier. And, the PC reply was: "We are working on it."
The bidders also sought clarity on the petroleum pricing formula, along with a firm commitment that there would be no change in it for the next five years, or more. They insisted that the government should guarantee them a long-term petroleum products pricing formula to enable them to work out the cash flow and profitability which needed to be shown to the investors before they should commit their investment in the bidding round.
The bidders also sought clarity on some other legal issues such as licensing and fee structure to be worked out by the Oil and Gas Regulatory Authority (Ogra) for deregulated oil sector regime.
It was also suggested that the PC should announce the reserve price for PSO, so that the not-so-serious bidders could drop out.
Some bidders also sought extension in the deadline for finalisation of bidding consortiums. There was, however, unanimity among them that firm answers to pending issues be incorporated in the draft of the bidding documents and only then the sale/purchase agreement (SPA) be sought by the PC. And, finally, the bidders asked for 30 clear days after submission of SPA with the earnest money to submit their bids.