Pakistan - Out of fuel

Faced with a crisis in fuel supply, the government decided last night to shoot the messenger and suspend four officials from the bureaucracy, leaving ministers untouched.

The minister for petroleum escaped accountability after telling the Senate and later the media that the shortages are the result of a spike in demand because of the downward revision in prices, as well as a partial shutdown at Parco, the country’s largest refinery.

Ogra, the regulator for the oil and gas sector, placed the emphasis elsewhere, saying that the crisis is due in part to the rise in demand, and also to the unwillingness of oil marketing companies to maintain stocks to help tide over temporary difficulties.

Meanwhile, the finance secretary told the Senate that the circular debt was the main reason, because of which PSO could not arrange the funds to pay its creditors and thus found itself unplugged from its lines of credit.

So which of all these is it? Common sense says all these factors must have played a role, but the evidence says it was mismanagement of the circular debt, which caused a severe crisis of liquidity in the country’s largest oil importing company — PSO — which was the primary cause.

The unexpected surge in demand could certainly have aggravated the problem, but the figure given for the size of this surge — 23pc — cannot justify the complete closure of pumps across Punjab and parts of Khyber Pakhtunkhwa.

A string of defaults on its payments for oil imports at PSO begins on Nov 28 and escalates rapidly to Rs46bn in a week’s time. The company began sounding the alarm as early as Dec 24 raising the spectre of “an imminent supply chain breakdown”.

Today government ministers and functionaries are searching for all sorts of excuses that absolve the government of responsibility in the creation of this mess, while heads roll in the wrong quarters, and different departments give us different ideas of how long it will take for the situation to normalise.

They have offered excuses before the Senate, on media talk shows and at press conferences that say everything, other than stating the plain fact that we are in this mess because they have failed to manage the circular debt, in cause and consequence.

This circus must end. In large part, the crisis is also the result of the heavy centralisation of all decision-making in the hands of a very small number of individuals, which is the hallmark of this government’s style.

Evidence is in the fact that when the crisis is at its peak, both the prime minister and the finance minister, widely understood to hold key decisions in their own hands, are both out of the country, while the government clutches at straws to explain itself. The situation is serious, and demands a mature response.