Subsidizing Sleaze

The Pakistan State Oil Company’s (PSO) revolving debt has increased to about Rs. 130 billion. The caretaker government has found a very strange and amateurish solution to the issue without critical and intrinsic scrutiny of financial and operational affairs of the organization. PSO is an oil marketing company (OMC) engaged in the import of POL products to the tune of about US$ 15 b
annually and its supply to institutions and retail sales.
The caretaker government in a recent move has decided to grant a subsidy of Rs. 30 billion to the PSO for debt relief to lessen its revolving debt and restructure its arrears. The Ministry of Finance has already allocated Rs. 5 billion to the Sui Northern Gas Pipelines Limited (SNGPL) for onward payment to PSO. The balance payment Rs. 25 billion for domestic consumers is under way.
Moreover, the GOP also plans the transfer of ownership of two power plants to PSO as a part of a strategy to reduce PSO’s revolving debt, the decision of the Cabinet is expected soon.
The PSO was under a serious inquiry on account of misappropriation, overcharging the consumers, importing substandard diesel and motor spirit (petrol), flouting ECC’s decisions on price fixation mechanism with respect to redundant price fixation formulas instead based on Platts Oil gram and payment of premiums on diesel containing higher sulfur contents, with
evidences available with the investigating agency.
These aspects were also ascertained by the Committee under the chairmanship of late Mr. Justice Rana Bhagwan Das, formed by the then Chief Justice of Pakistan. The committee prepared a detailed report on the TORs prescribed by the Supreme Court of Pakistan (SCP) and submitted the same to it. The report was not made public and sealed and preserved in the SCP. Time has
come to make that report public in the best interest of the nation and POL consumers. It is understood that the findings of the inquiry report were endorsed by the Rana Bhagwan Das Commission report. The overcharge by the OMC, dealers and refineries, according to the earlier inquiry report from the consumers and depriving the GOP estimated to Rs. 180 B which now has increased to about Rs. 500 billion annually, being illegally pocketed by them.
This is not the only instance that the GOP is giving unjustified and undue subsidy to public sector organizations. In yet another case the government granted a subsidy of about Rs. 9.00 billion on which the bank financial charges were paid to the tune of about Rs. 12 B which eroded the intent of subsidy and on the contrary resulted in extra burden on the GOP. The case of other state-owned enterprises is no different.
One wonders that on one hand the GOP is in a tight jacket to fulfill and implement IMF’s stringent conditions for raising taxes on export sectors, increasing electricity and gas tariffs taxing and other measures which are unnecessarily escalating inflation, the killer of all values, attaining snowball effect tarnishing the fabric of the society. On the other hand, the government is thoughtlessly gracious enough to grant subsidies which do not even reach the intended sector of the society and is vanished in the process.
One wonders how could the finance managers of country be so naive and ignorant of the corruption and corrupt practices and intentional poor governance in organizations working under its control. This certainly tantamount to subsidize corruption and corrupt practices.
Unfortunately, no political party has even mentioned eradication of such corruption in its manifesto. It is time that all pillars of the society i.e. the parliament, establishment, judiciary and last but not least the media should come forward to actively expose corruption and eradicate poor governance from the country.
The author is Former Chairman, National Tariff Commission
& Ex-Consultant NAB and the World Bank