ISLAMABAD - The oil marketing sector of the country would be inquired very soon to indiscriminately provide a level playing field to all marketing companies only to maintain competitive practices in the sector.Viewing alleged presence of cartelisation against competitive practices in oil marketing sector, the Oil and Gas Regulatory Authority (Ogra) in a bid to maintain competitive environment has decided in principle to get the audit of the sector done, it was learnt on Tuesday.Well-placed sources aware of the matter informed TheNation that owing to the alleged presence of cartelisation in oil marketing sector against competitive practices, the regulatory authority first time has decided to get the audit of the sector done in a bid to maintain competitive practices. It was also brought into the notice of Ogra that increase in the profit of oil marketing companies (OMCs) has been calculated while a reduction in the profit has also been witnessed in recent past. It is only because few oil refineries like Attock Refinery had established its own petroleum marketing company registered with a name of Attock Petroleum Marketing Company and similarly another Parco Refinery had set up a marketing company named as Total Parco operating the sector. They further said that these refineries are maximising their profits due to their own marketing companies while small-scale marketing companies dependent on the blessings of oil refineries are earning low profits. Even these refineries viewing fluctuations in the oil prices ostensibly used to sale out their refined products to own marketing companies on priority basis only to maximise profits allegedly by managing cartel in the sector. Upon this, Ogra felt the need to ascertain that level playing field is available to the entire oil marketing sector companies, and complete ring fencing exists in case of refineries owned OMCs and vertically integrated groups.However, Ogra, after repeated complaints and serious reservations raised by many in the sector on different occasion felt the heat of the growing misery, has finally decided to provide a level playing field to all marketing companies by getting their audits done. The period of inquiry covers the period starting FY 2009.It was also learnt that in case of refineries this inquiry would ascertain if a special relationship (parent/subsidiary/associate) exists between refineries and OMC’s and any other company doing business with the refineries/OMCs. Also, it would ascertain allocation basis of its entire production slate to its buyers/OMCs and whether there exists a material difference, favourable or otherwise, and in the allocation to its subsidiary/associated companies compared with other market players. Further, allocation pattern during first twenty days and last ten days of the month and whether there exists a material difference, favorable or otherwise, in the allocation to its subsidiary/associated companies compared with others especially in a situation where there is an expected increase in prices in the subsequent month. Again, the sale price basis of refineries products (regulated & deregulated) and whether there exists a material price difference, favourable or otherwise, in case of its subsidiary/associated companies as compared with other market players. It must be ascertained that arm’s length transfer pricing practices are in vogue in case of refinery owned OMCs to ensure level playing field for all OMCs. Commercial terms & conditions (discounts, credits etc) being offered to buyers/OMCs and whether there exists a material difference, favourable or otherwise, in case of its subsidiaries compared with other OMCs.Furthermore, this inquiry in case of OMCs would also ascertain that the sale price basis of products being sold (regulated & deregulated) and whether there exists a price differential between refinery owned OMCs and other market players. Similarly, the market share of some refinery owned OMCs is growing at a very rapid pace and reasons for the same need to be ascertained. Arm’s length transfer pricing from refineries OMCs level market also needs to be ensured during the entire course of this historic initiative of the regulator to maintain competitive practices in the oil marketing sector.It is pertinent to mention here that the Federal Government had allowed number of refineries to establish their own subsidiary Oil Marketing Companies (OMC) or enter into joint venture relationships. Attock Group of Companies owns two refineries namely Attock Refinery Limited and National Refinery Limited and had also set up Attock Petroleum Limited, its oil-marketing arm. The group, therefore, features complete vertical integration. Also PARCO refinery had entered into joint venture with Total and had formed a marketing company by name of Total PARCO, which is carrying out POL products marketing on a countrywide basis.
Also, PARCO is also carrying out marketing of petroleum products through its own subsidiary i.e Pearl PARCO.