ISLAMABAD: The government has started the audit of all oil refineries and oil marketing companies (OMCs) to rule out the possibility of irregularities in taxes, product sourcing and transportation costs.

A senior government official told Dawn the Petroleum Division had asked 25 OMCs and refineries to ensure availability of relevant personal and entire record for examination by the audit teams.

In the first step, an audit team of the Director General Audit (DGA) of Petroleum and Natural Resources will visit Attock Refinery Limited (ARL) in Rawalpindi and Pak-Arab Refinery Company (Parco) in Multan and all OMCs and officials and depots at Machike, Sheikhupura, next week. This will be followed by visits to other OMCs across the country.

The Petroleum Division has asked all the 25 companies to keep the record, including copies of goods declaration forms, treasury challans, quantity registers and any other relevant record readily available for audit purpose, and extend full cooperation to the audit teams to be joined by a representative of the Petroleum Division.

Informed sources said the exercise had been launched in view of detailed investigations by an inquiry commission led by a senior officer of the Federal Investigation Agency into oil shortage crises.

The commission had recommended a detailed audit of various aspects, including petroleum levy, inland freight equalisation margin, product orders, etc, to check, among other things, smuggled products into the Pakistani market. The commission had estimated a revenue loss of about Rs250 billion per annum on account of smuggled petroleum products.

The sources said the Petroleum Division had also received complaints about product sourcing of OMCs around Machike, Multan, areas which did not match the local production. There were reports that lorries carrying smuggled products from Iran was reaching up to Karachi and Multan and Shershah areas. Therefore, it was felt to cross-match the production capacity of local Parco with the stock position and storage capacities of the marketing companies.

Sources in the OMCs said it was sort of an unusual thing as refineries and OMCs had their own internal and independent auditors as required under corporate rules of the Securities and Exchange Commission of Pakistan and the audited reports were submitted to the SECP on a quarterly basis. Any confusion, they added, could be clarified through the SECP’s own mechanism and cross-checked with the Oil and Gas Regulatory Authority (Ogra) before ordering special audit of the private sector entities in case of any suspicion.

The recent disclosure of fake product orders by a troubled OMC had also required the Petroleum Division and DGA of Petroleum and Natural Resources to conduct routine audit of all the entities under their domain to avoid any surprise shocks.

The notification for audit of the OMCs has come days after the government asked the country’s all six oil refining facilities to provide full details of deemed duty collected on petroleum products since their inception two decades ago, along with third-party audits of their utilisation.

The Petroleum Division had on Monday asked the managing directors of five major refineries — Parco, NRL, PRL, Byco and ARL — besides ENAR Petroleum Refining Facility, to provide within two days the “yearly breakup of deemed duty collected by each refinery and its utilisation since its inception”.

They were also asked to submit reports of audits of deemed duty conducted by third-party or government auditors from their inception. The managements of all refineries are required to furnish the collection record and audit reports electronically within two days for onward submission to the Cabinet Committee on Energy (CCoE).

The letter said orders had been issued under a decision of the Cabinet Committee on Transport and Logistics (CCoTL), led by Minister for Maritime Affairs Ali Zaidi, in its meeting last week. “The CCoTL directed Petroleum Division to place the matter of deemed duty before the CCoE in its next meeting with yearly breakup of duty collected by each refinery and its utilisation since its inception. The CCoTL also unanimously recommended that Petroleum Division carry out an audit of the deemed duty collected by petroleum refineries for their upgradation,” noted the minutes of the meeting.

Published in Dawn, September 9th, 2021