KARACHI: This is apropos a news item “PSO accused of succumbing to global oil mafia” carried by Business Recorder yesterday. PSO would like to elucidate the following. “PSO firmly believes in transparent business practices and upholds the highest standards of business ethics in all its dealings and practices. As the national oil marketing company, PSO’s foremost responsibility is ensuring an uninterrupted supply of fuel across the country.
“PSO strictly follows the Public Procurement Regulatory Authority (PPRA) rules and guidelines for all its tendering processes to ensure competitive bidding procedures and provides a level playing field to all suppliers. Furthermore, PSO’s tendering process has been scrutinized by the Supreme Court during sou-moto proceedings wherein the Supreme Court appointed auditor KPMG submitted a detailed report endorsing the transparency of the process and no irregularity or non-compliance was found.
“In accordance with the recent PPRA rule 16-A allowing fuel procurement through framework agreement under the pre-qualification process, PSO has initiated the prequalification process which significantly reduces the overall ordering time thus allowing the Company to cater to demand-supply fluctuations and meet the nation’s fuel demand more efficiently while taking full advantage of the e-procurement facility recently allowed by PPRA. The shorter procurement cycle may also reduce PSO's exposure to demurrages which will not only benefit the company but also the national exchequer in terms of forex outflows. Furthermore, the prequalification process strengthens the due diligence process of the Company for its petroleum international vendors/suppliers particularly with regards to their standing in the international market, experience, operational and financial capability and legal history so as to ensure that PSO does business with suppliers that can deliver quality products in a timely manner while ensuring compliance with international trade laws, rules and restrictions. Additionally, suppliers fulfilling the criteria and requirements of the prequalification may enter the panel of suppliers at any point in time throughout the validity period of the prequalification. Therefore, the prequalification process would not restrict participation of parties but ensure that the Company’s interests are secured.
“In PSO's open competitive bidding process, tenders are floated through advertisements which are published on PSO and PPRA websites along with renowned newspapers. International suppliers have to participate in the tenders directly, there is no active role of local agents in the bidding process as incorrectly mentioned in the story. Around 12-15 international suppliers actively participate and compete in PSO’s POL tenders who can effectively compete with the entire POL supplier base doing business in Pakistan. Hence, it is incorrect to refer to them as a small group. The story is self-contradictory, as in the second paragraph, the story says that "current PSO tendering process is designed in a fair way to encourage open participation from serious suppliers". Bid Bond and Performance Guarantee provisions are kept in PSO's tenders strictly in accordance with PPRA rules.
“The penalties for delay in delivery of cargoes are in line with the PPRA rules and as per the terms and conditions of governing contracts. These terms have been kept keeping in view the fragile petroleum products supply chain of the country. Any inordinate delays in the arrival of PSO's cargoes can make the country's overall supply chain vulnerable as PSO, being the national oil company and the largest OMC, having around 45 percent of the market share is bound to supply products in the market to keep the nation’s wheels running and fuel shortages can put the entire economy of the country under pressure. With regards to penalties imposed on M/s 1Energin, the cargo supplied by them arrived after an inordinate delay of two weeks from the contractual delivery date and PSO had to make a tremendous effort to avoid a dry out situation. The penalties imposed were strictly as per the terms and conditions of the contract.
“The specifications of products to be imported in Pakistan are regulated by the Government of Pakistan (GOP) through Ministry of Energy (Petroleum Division) which are uniform for the entire industry and have to be complied with. Moreover, in line with the international developments, GOP has already changed the specifications to Euro V grade. It is also worth mentioning that PSO fully supported GOP’s initiative to change the specifications to Euro V and became the first oil marketing company to introduce Euro V fuel in Pakistan despite resistance from various quarters including local refineries and few other oil marketing companies.
“PSO awards cargoes as per the demand / supply situation in the country. Due to the 30-day international tendering period as per PPRA rules and the potential demand / supply fluctuation and local refineries production vulnerability during this 30 day period, PSO floats tender for the requirement keeping in view the best case demand scenario and awards cargoes as per actual requirement after tender opening on the basis of lowest bid value. This is a routine practice and cargoes are always awarded by PSO after thorough review of the demand / supply situation and multiple level approvals within the organization irrespective of who is the supplier. Therefore it is incorrect to assume that PSO did not award cargo to any supplier to discourage them from participating in the tenders. This can also be validated from the fact that referred tender was awarded to one of the new suppliers M/s Max Energy and referred supplier M/s 1Energin was also awarded the cargo from subsequent tender when there was the need to buy that cargo.
"In order to achieve economies of scale and pass on the benefit to the end user a 100,000 MT volume based tender was launched instead of 50,000 MT cargo based tender as a litmus test in parallel to normal tenders with the aim of getting lower premiums for higher committed volumes. However, the quotes received in the said tender were not in line with the perceived benefit of low premium due to large quantity therefore no cargo was awarded from that tender and PSO continued with its usual cargo size tendering process of cargo based bidding and is awarding all its tenders accordingly.”
Being a responsible corporate entity, PSO complies with all the rules and regulations of corporate governance and believes in transparency in all its business dealings and practices. The Company is committed to contributing to the national progress and leaves no stone unturned in keeping the wheels of the nation’s economy in motion”-PR
