Staff Report
ISLAMABAD: Pakistan State Oil (PSO), the nation’s largest public sector oil marketing company (OMC), has called on the federal government to delegate regulatory control from the Petroleum Division (PD) to its Board of Management (BOM) in response to increasing competition and growing financial losses.
According to industry sources, PSO has formally submitted a request to the Petroleum Division, urging a review of its current operational framework. As a state-owned OMC responsible for maintaining Pakistan’s energy supply chain, PSO has been struggling to compete against international players who are not bound by the same strict procurement regulations.
“Facing rising competition from global oil giants such as Gulf Oil Marketing Company and Saudi Aramco, PSO has placed request to grant more autonomy to the PSO to stay competitive and address its financial losses,” said sources.
As per the sources, PSO has emphasized that existing rules, particularly the Public Procurement Regulatory Authority (PPRA) regulations and the bonded warehouses policy, are putting the company at a disadvantage. These regulations require PSO to disclose its purchase prices and source suppliers through an open tendering process. This transparency, while essential for public sector accountability, allows foreign competitors to negotiate better deals, especially for distress cargo. These competitors can then undercut PSO on price, further exacerbating the company’s financial struggles.
To counter this, PSO has asked the federal government to transfer regulatory powers to its BOM. This shift would allow the BOM to operate independently, managing procurement and operational decisions autonomously while adhering to government policies on key appointments, such as those for the chairman and managing director. According to the company, this move would enable PSO to become more competitive and resilient in the face of challenges posed by international competitors.
PSO’s letter to the government also points out overlaps between the recently enacted State-Owned Enterprises (Governance and Operations) Act, 2023 (SOE Act) and the Marketing of Petroleum Products (Federal Control) Act, 1974. The SOE Act allows state-owned enterprises to create independent procurement policies, once approved by the federal government, that could limit the applicability of PPRA rules. PSO has already submitted its new procurement policy to the Petroleum Division and is awaiting approval.
The company’s BOM also highlighted the disadvantages posed by the current regulatory structure. PSO, under federal control, must comply with numerous laws and is subject to government audits that further constrain its operations. The company cited the example of the Securities and Exchange Commission of Pakistan (SECP), which operates more independently due to its policy board. PSO believes that similar autonomy could help it streamline operations and compete more effectively in the market.
In May 2024, senior PSO management met with officials from the Finance Division, the Central Monitoring Unit (CMU), and the Asian Development Bank (ADB) to discuss these regulatory challenges. During these discussions, the overlapping provisions of the SOE Act and the Petroleum Products Control Act were acknowledged, and potential amendments were discussed.
The BOM has unanimously agreed to explore the possibility of the federal government delegating authority to PSO’s board under Section 13 of the Marketing of Petroleum Products (Federal Control) Act, 1974. This move would give PSO the operational freedom it needs to enhance its competitiveness in an increasingly challenging oil market.
Over the past few months, PSO has been hit hard by growing competition from Gulf Oil Marketing Company and Saudi Aramco, leading to significant financial losses. The company’s leadership believes that without greater autonomy, it will struggle to stabilize operations and remain competitive in the face of aggressive international players.
