The oil fiasco

Where should the buck stop?

The car lines at petrol stations in numerous cities of Punjab and in Karachi portray a sad reflection over the functioning of government in Islamabad. These people standing in the lines for hours were angry with special rage directed at those who shouldn’t be difficult to guess. The summary suspension of four key functionaries from the key relevant organisations by the PM after landing from Saudi Arabia provided no solace to the suffering people. This hasty decision without ascertaining first the responsibility and determining where the buck ought to stop was, indeed, undesirable. Good governance practices wouldn’t endorse it either. Or would they? No corporate head would do it, let known the head of a government. Hasty decisions aren’t evidence based.

Watching the horse pulling a car without petrol was not a fun thing to watch. It was a powerful satire on the way our government functions. A concerned citizen expressed the popular sentiments in the following words sent to me. “Having lived through a large part of the history of Pakistan, and been in the middle of a lot of it in the early years, having been blessed with belonging to the fourth generation of one of the founding families, and still struggling to do the best one can as a labour of love for our beloved nation, I am at a loss today [and] cannot bear to see it busting at the seams. What do the next few days hold for us, the common people, struggling to survive?”

Let us shed some light over the basic facts about this crisis. Populist analysts are confusing the bank default by the PSO with the circular debt. PSO which had not defaulted before had become a defaulter on its bank loans to the tune of Rs50 billion. Its circular debt, in addition to the bank default, had reached a figure of close to Rs200 billion. Because of the loan default PSO was denied opening of new Letter of Credit for importing oil. PSO had sent timely information about this to the relevant quarters.

The Petroleum Minister continues to harp on the issue of demand increase due to panic buying. Well, if there was demand surge, who was supposed to anticipate this? We are told that in spite of this surge in demand, PSO was able to increase its sales by 37 per cent. So, enhanced demand had no bearing on the shortage of petrol. If not, then what were the real causes of the oil fiasco?

The real cause, many say, was the PSO’s bank default. Had it been avoided by releasing timely funds, the crisis could have been avoided. Only when the Finance Ministry dished out Rs17 billion against the circular debt of Rs200 billion was the PSO able to order three cargoes of petrol. The question is why the Ministry couldn’t do it earlier anticipating the nature of the emerging oil crisis? The government is now promising that the crisis would be resolved with the arrival of these ships. Will it help overcome the crisis? One only hopes that it will.

We understand from experts that black or furnace oil and petrol or white oil can’t be delinked. It is also not true that PSO was still supplying furnace oil of around 16,000 tons for power generation. According to PSO sources, furnace oil inventory was almost zero. Power plants were using their own stock of furnace oil which was also about to finish. This would disrupt electricity supply to the households as well thus further exacerbating the woes of the common citizens who are already suffering by waiting for hours in the long queues to stay mobile. Rather than a piecemeal solution, a comprehensive strategy is needed to avoid this from happening in the future.

Who were the real culprits in the matter? The facts point toward two key ministries. It is hoped that instead of glossing over this, the inquiry will identify who to blame. But please don’t blame the victims. If those suspended were responsible, punish them by all means, but not without evidence. The public needs to know where the lapses were. In the working of the bureaucrats or at the top of the ministerial hierarchy? Important people in our governance system have not learnt to quit honourably for their failures. They look for scapegoats which are easy to find, especially at the bottom of the hierarchy.

First, the incompetence of the Finance Ministry not to timely bail out PSO from its loan default must be acknowledged. Whatever the reasons for not releasing the needed funds, the oil fiasco has damaged the reputation of the present government in a big way. The Finance Minister’s talk about “deep conspiracy” against the government has no takers. Most people firmly believe that it is sheer incompetence of the government.

Secondly, the Ministry of Petroleum also did not act swiftly to avoid the present crisis. Why was the Minister not running around to ensure that petrol was available to the public? Good governance practices demand that “the buck must stop at the right places”.

Thirdly, the insensitivity of the rulers towards the plight of the citizens is being felt at most places. Better governance requires that key appointments are made on merit considerations. Ignoring this fundamental principle of good governance can cause irreparable political damage to any sitting government.

Lastly, now is the time to take stock of the entire oil situation and to ensure that instead of knee-jerk reactions, the PM will strengthen the anticipatory planning capacity of his government. This would be absolutely imperative to avoid the recurrence of the events like this oil fiasco. Remember, missed opportunities can’t be regained.