EDITORIAL: First things first, prime minister Imran Khan, according to federal information minister Shibli Faraz, has removed finance minister Dr Hafeez Shaikh over rising food inflation and replaced him with minister for industries and production Hammad Azhar. Azhar is the third finance minister to be appointed since the PTI-led coalition government came to power following the 2018 general elections. The newspaper will make a detailed comment on this major political/economic development in its tomorrow’s edition.

Be that as it may, Asad Umar, the much overworked Federal Minister for Planning, Development, Reforms and Special Initiatives, chairman of two extremely challenging cabinet committees - China Pakistan Economic Corridor, and Energy - as well as chairman of the National Command and Operations Centre (NCOC), held a press conference on 26 March, 2021 on the findings of the inquiry report on the June 2020 oil crisis in the country when POL products were not available on the market subsequent to the government decision to reduce prices (based on supplies procured a month ago) to a level lower than the prices at which the existing stocks had been procured by the oil marketing companies (OMCs) till such a time as the price was raised.

Umar revealed that Nadeem Babar, the Special Assistant to the Prime Minister on Petroleum, had been asked to step down by the Prime Minister while the Secretary Petroleum was directed to report to the Establishment Division pending a Federal Investigation Agency (FIA) investigation to determine whether: (i) OMCs failed to meet the minimum requirement for maintaining inventories as per law; (ii) the difference between reported and actual sales and who was behind this criminal action; and (iii) whether there was any hoarding and if so who was responsible, including deliberate delay in berthing oil ships stationed at outer anchorage so they can be berthed when higher prices become effective; and (iv) some in administrative positions in the ministry do not have the capacity to undertake what is required. It is the realization of lack of expertise by the staff of ministries, referred to as generalists, that accounts for the Prime Minister’s decision to appoint an entire team of qualified advisers and special assistants at considerable public expense to take informed decisions. However, flawed decisions continue to be made in a range of ministries, including conflict of interest with the emerging consensus that it may be preferable to rely on politicians to head ministries, because they at least are answerable to the general public.

The decision is widely regarded as justified that took a long time coming even though the inquiry report was submitted to the government in December 2020 and leaked to the media by 20 December 2020 in which the following observations were made: (i) the summary of the Ministry of Energy, Petroleum Division, (MoEPD) to cancel imports which led to the unprecedented oil shortage was approved by the cabinet two days after the issuance of a controversial order dated 25 March 2020 by MoEPD to OMCs to ‘rationalize’ imports (words ‘ban’ and ’cancel’ not used) based on the flawed assumption that there was a glut in local refineries due to a downward trend in international prices; (ii) had the OMCs been given extended quotas to import during this period foreign exchange could have been saved and the oil crisis averted; and (iii) PSO ship was forced to discharge earlier by MoEPD by violating the priority-queue to delay the berthing of MT Ploutos carrying oil for OMCs with another version claiming that Oil Companies Advisory Council (OCAC) intervened to delay its berthing by about two weeks. Ministry of Maritime Affairs wrote in July 2020 that it does “not acknowledge/recognise the role of OCAC as it has no force of law behind it and Port Qasim Authority (PQA) or Fauji Oil Terminal Company is not under any obligation to follow the dictates of OCAC”.

Nadeem Babar is on record as explaining to the cabinet at the time the summary to rationalize imports was under discussion that the oil crisis was exacerbated due to an inexplicable surge in demand and a dramatic reduction in smuggled oil from Iran (claiming oil supply was 849,000 metric tonnes in June 2020 compared to 650,000 tonnes in June 2019). The government dealt with the supply shortage by increasing supply from PSO by 78 percent, at high rates, and selling at lower rates compelling the country to suffer massive losses, as well as launching raids on depots and stations to deal with hoarding.

There is, therefore, a need for the government to take timely decisions after the release of every inquiry report, to engage with sector experts operating outside the government and finally to ensure that the technocrats inducted because of their expertise do not carry the expensive baggage of conflict of interest, as some of them still present in positions of power do unfortunately.

Copyright Business Recorder, 2021

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