Import of petroleum products: PD accused of flouting decisions of all top bodies for PNSC

Petroleum Division is accused of flouting decisions of all top decision making bodies for Pakistan National Shipping Corporation to have the first right of refusal for import of petroleum products, well-informed sources told Business Recorder.
This complaint has been lodged by the Ministry of Maritime Affairs at a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet. According to the Ministry of Maritime Affairs, most of Pakistan's major trading partners including China, Turkey, the USA, South Africa etc provide flag protection to their national carriers. At present Pakistan's own merchant shipping fleet transports only about 16 percent of the total seaborne trade of Pakistan as against 40 per cent enshrined in the Pakistan Merchant Marine Policy, 2001.
Maritime nations across the world patronize their national flag by providing various relaxations, cargo preferences and incentives to develop their national fleet. In line with international practice, the Government of Pakistan has also adopted these practices through law/policies aimed towards giving flag preference and first right of refusal for both government cargoes (Section 77 of Merchant Shipping Ordinance 2001) and trade.
In addition to conserving foreign exchange outflows, national flag protection also provides the following advantages:(i) reliable merchant shipping capability during war and peace;(ii) continuity of trade regardless of sanctions or embargos and ;(iii) ensure supply of strategic cargoes.
Pakistan National Shipping Corporation (PNSC) procured its first oil taker in 2001 and since then has successfully transported over 80 percent of the crude oil imported into Pakistan on FOB basis. PNSC has also transported MOGAS and HSFO for PSO. PNSC's contribution to the national economy between 2001 and 2018 is as follows ;(i) dividend paid to the government- Rs 2.579 billion; (ii) taxes paid to the government- Rs 7.280 billion and ;(iii) foreign exchange/ revenue earned equivalent $ 2.167 billion.
According to sources the energy sector constitutes the life line of Pakistan's economy and thus all energy imports should be regarded as strategic cargoes. In addition, edible oil, which constitutes a basic food security item, should also be indentified as strategic cargo. All such strategic cargoes should be imported on FOB basis.
At present, Pakistan is critically dependent on foreign vessels for import of these strategic cargoes (except crude oil), thus, making Pakistan susceptible to risks in case of emergencies, whereas Pakistan flag vessels can ensure uninterrupted supply of such cargoes provided that their capability is built robustly.
A case in point is that of Iran, which survived crippling sanctions primarily due to its own shipping lines. An estimate of freight currently being paid by Pakistan on energy cargoes during 2018-19 is $ 467,600,000 on 707 ships of crude oil- PSNC ( PRL, PARCO, NRL), crude oil (Byco), MOGAS (PSO), MOGAS( other OMCs), HSD(PSO), LNG, LPG and coal. Total savings are estimated to be $ 40,500,000.
The sources said, despite clear provisions of the law and maritime policy and repeated instructions from the Cabinet and ECC, the requirements for flag protections and provision of first right of refusal to the national flag has not been implemented in letter and spirit. As a consequence, it is precisely due to this that the private sector could not be attracted towards this extremely important sector despite various efforts over the past 30 years and the PSNC remains the only ship owning organization in Pakistan.
Ministry of Maritime Affairs argues that implementation on Maritime Policy and decisions of cabinet and ECC will ensure a boom in shipping industry of Pakistan as well as result in substantial Forex savings Ministries of Finance and Commerce are fully supporting the proposal of Ministry of Maritime Affairs but Petroleum Division maintains that PNSC should operate and grow in a commercial manner without seeking government protection.
Ministry of Maritime Affairs has submitted the following recommendations to revive the shipping sector: (i) all government organizations and state controlled enterprises be instructed to strictly abide by the cargo preference requirements laid down in section 77 of the Merchant Shipping Ordinance 2001 and in the light of Cabinet and ECC decisions; (ii) strategic cargo including MOGAS, HSD, LPG etc imported by government organisations or state controlled enterprises be imported on FOB basis through Pakistan flag vessels having first right of refusal and freight paid in Pakistan rupees;(iii) relevant public sector organisations be directed to ensure that LNG cargo be secured for Pakistan flag when finalizing bilateral agreements for LNG with Russia, Malaysia, Indonesia or others in compliance of section 77 of the Merchant Shipping Ordinance 2001; (iv) Pakistan flag vessels to be provided berthing at all Pakistani ports; and (v) cabotage cargo will be restricted for Pakistan flag vessels and for vessels chartered by Pakistani shipping companies.