MUHAMMAD QASIM KHAN, CJ.----Through this single order I intend to dispose of Writ Petition No.25669/2020 and W rit Petition No.26868/2020 involving same questions of law and facts.
2. These writ petitions in the form of PIL (Public Interest Litigation) have been filed under Article 199 of the Constitution of Pakistan seeking issuance of appropriate orders concerning the acute shortage and thereafter unreasonable price hike of petroleum products occurred in the first and second quarters of the year 2020.
3. The main crux of prayer clause is that an appropriate writ in the nature of 'Mandamus' be issued against the respondents for the smooth supply of the petroleum products and the price hike in the petroleum products engineered by the companies in order to take undue advantage from this dreadful situation may be declared unlawful and illegal.
4. All the concerned quarters were taken on board to dig out the causes of this national crisis. During the proceedings of the petition, it emerged that apparently the Oil and Gas Regulatory Authority (OGRA) and Ministry of Energy (Petroleum Division) {MoEPD}were responsible for the smooth supply as well as check on arbitrary hike of the petroleum products. The core question to be determined by the Court in the given situation was to ascertain who failed to perform its obligatory duties efficiently resulting in national crisis qua shortage of petroleum products?
Or were there some external factors beyond control which caused the crisis? Additionally , what measures could be suggested or devised to avoid such like situation in future?
5. Heard. Record perused.
6. Undoubtedly the Oil and Gas sector of a country is a pivotal part of its economy . Petroleum is one of the prime sources of energy production. It is a conve ntional method with ease of use and key to stimulate the micro economic development of every country deeply connected with the mobility of transport system. It has revolutionized the entire transport network of the world, be it road, rail, water or aviation transport. Energy and economy are inter connected, hence it has strong impacts on the national economy of any country . However , unfortunately on a number of occasions the people of Pakistan have experienced acute shortage of petroleum. Earlier in the year 2015 the episode of petroleum shortage occurred, which has haunted the.country again in the early part of 2020.
The difference, this time, was that the crisis developed over a period of time, persisted too long and witnessed a relatively poor response from the government. There had been no sign that the concerned authorities, regulators or market players had learnt any lesson from the past.
7. There is no gainsaying the fact that the oil industry always tends to minimize its losses when prices fall and maximize inventory gains as they move upwards. Businesses rarely follow principles, but incessant crisis of the last year confirmed the governance structure to be more fallacious than it was earlier . As the price decline hit the market in December 2019 and January 2020 the oil industry had curtailed its imports, as well as, local production.
Red flags were already up when the corona virus led to the lockdowns by the end of March 2020 with ensuing result of substantial drop in the consumption. The wheat harvest was just round the corner when local refineries started to close down for limited off take by Oil Marketing Companies (hereinafter to be referred as OMCs). It was quite clear by the end of March that OMCs were not maintaining mandatory stocks for the 20-days' consumption cover as per the rules and licence-conditions contained in `The Petroleum Act, 1934'. Unfortunately , even the strategic reserves (necessary for security purposes) had already been compromised. The supply chain disruption was nationwide and affected all major cities and towns in Punjab, Balochistan, Azad Jammu and Kashmir , as well as, Gilgit-Baltistan. So much so that the province of Khyber Pakhtunkhwa officially admitted that its 77 fueling (petrol) stations had completely dried out. By the first half of April, all stakeholders were fully aware of the initial shortages.
At the same time the Oil and Gas Regulatory Authority (OGRA), the Petroleum Division and the oil industry were making friendly communications limited to file work. The rationing of oil products came into play around Eid-ul-Fitr in the third week of May, 2020. There also appeared some calls for a change in the pricing mechanism to a quarterly or weekly basis. In fact, when the priority should have been maintaining the stocks through administrative, regulatory and policy response to the shortage, the institutional debate remaine d focused on hedging against global oil prices. No wonder it was the supply chain that was managed like a Ponzi Scheme'.
8. For a country like Pakistan, it is not an easy job to move stocks from the port to upcountry especially when it is not equipped with the rapid means of transportation. Ironically , the world was suffering from storage constraints owing to a price crash while Pakistan went through one of the worst oil shortages in which the consumers were being forced to pay almost double prices.As the crisis culminated to its peak in the first week of June 2020, the industry along with the regulator and the government in its public discourse attributed the shortages to a sudden upsurge in consumption in that month. It quoted consumption of 850,000 tonnes in the month against the usual monthly consumption of around 650,000 to 700,000 tonnes. Being corroborated either by their relevant record or circumstantial evidence such excuse of the concerned quarters remained nothing more than a fable and bald assertion vis--vis the position that most major cities were already far from resuming normal business and educational activities. More surprisingly , the Government appointed a seven-member probe committee led by the same officers, which too, instead of arriving to some definite and conclusive result simply confined to blaming the industry for every dimension of crises. Separately , the regulator sent show-cause notices to nine OMCs for not maintaining mandatory stocks and finally imposed absurdly low fines on six of them. It was in June, 2020, when the instant writ petition was filed in the wake of an alarming position where the whole country had gone to a stand-still position and on account of shortage of petroleum and all kinds of activities in the country had come to a halt urging this forum to take cognizance of the matter . On the other hand, as it appears that the concerned officials were still adamant not to serve the public by performing their statutory duties.
9. It becomes evident through perusal of the available material that despite foreseeing crises in the making, no effort whatsoever was made to take decisive steps to nip the evil in the bud. Confronted with this position, notices were issued to the respondents directing them to submit their respective reports and para-wise comments. Apathy of the affairs persisted to such extent that replies submitted by the Government functionaries were not simply unrealistic but even every length of effort was resorted to for shifting the responsibility to some other organizations/institutions. Proceedings were carried out on number of occasions and keeping in view importance of the issue, Malik Muhammad Awais Khalid Advocate was appointed as amicus curiae to assist the Court on the subject. Further in order to chalk out future mechanism, learned Attorney General for Pakistan was required to appear before the Court. Vide order dated 30.06.2020, learned Attorney General for Pakistan was directed to establish contact with the Speaker National Assembly of Pakistan to take viewpoint whether he is ready to form a Special Parliamentary Committee with equal membership of Treasury Benches and also Opposition Benches to probe all the petroleum crises right from the month of March 2020 to the end of June, 2020 including the storage capacity , guidelines for strategic storage and increase, as well as, decrease in petroleum prices during this period and whether the Speaker is also ready to set a time-frame for such Committee to finalize its report and place it before the House for debate and if such report is prepared, same shall also be placed before this Court. On the next date of hearing i.e. 09.07.2020, though report with regard to draft notification for 'appointment of commission' was submitted on behalf of the Federal Government, however , deeming it deficient for resolution of the real and attending issue with obvious view of avoiding repetition of such incident(s) in future, this Court vide order dated 16.07.2020 besides directing for establishment of the Commission had also outlined the following ToRs:- "1. Whether the Government made any policy , during the crisis occurred to guide the authorities to take necessary actions and what steps were taken for the smooth supply of Oil? Whether such issue was discussed in Cabinet and any summary was moved by Petroleum Minister and what were the suggestions in it and what decision was taken by the Cabinet or P .M.?
2. Whether during the period when there was shortage of petroleum products in Pakistan, was there sufficient quantity of petroleum products available in the country? If so, who were responsible for hoarding and consequent shortage and petroleum crisis and what actions were or should have been taken against hoarders by the concerned authority?
3 Is there any mechanism by the Federal Government, OGRA or the oil companies for the storage and supply of oil during the crisis/emergency period in order to keep the flow of oil products continuously and how much petrol was supplied to oil companies prior and after the crisis and what is the storage capacity of dif ferent oil companies?
Whether any order , decision, action or inaction including ban and subsequent relaxation on .imports of petroleum products by any person, Authority or Division was meant to and/or did confer any undue benefit or advantage to any person including. O.M.Cs., refinery , dealer etc in this crisis?
5. To examine the role of refineries/oil companies and determine their responsibility in the shortage/crisis vis--vis the procurement from local sources, imports, storage and supply in the country: i. Whether the Ministry of Petroleum and OGRA were ill prepared for the artificial crisis, and its inconsistent response added to the uncertainty and panic in the country? ii. Whether the OGRA failed to handle the situation under the mandate of OGRA Ordinance, 2002?
Whether the Officials acted promptly under the mandate of Sections 3 and 4 of Petroleum Act, 1934 in order to deal with the situation? iv Who are the of ficials responsible and guilty of misconduct and criminal negligence? v. Whether the poor risk management of the concerned authorities is the cause of this crisis?
6. To determine the responsibility of the Petroleum Division, OGRA, O.M.Cs., Refin eries, Petroleum Dealers or any other Authority or person for the shortage/crisis.
Whether before the crises and during pandemic Covid-19 any restriction was imposed on Oil Companies for importing the oil products? If so, what policy was made so that Oil Companies could maintain the required storage of petroleum? i. What yearly data is available with the Government authorities and OGRA for the storage and usage of the petrol on monthly and daily basis? or the daily consumption of petrol in the country and total supply of various oil companies. ii. What is the total import of the petroleum products in the ordinary days? Whether the import of oil, this year, was less as compared to past years? W as low import the primary reason for shortage of petrol?
8. To identify the deficiencies in prevailing laws, regulations, licenses, mechanism for imports, price determination, storage, storage capacity and supply of Petroleum products across the country .
9. To examine the possibility of market manipulation/cartelization by O.M.C s/Petroleum Dealers etc. and identification of responsible for it. ii. Whether the Government both on federal and provincial level had provide d guidelines to regulatory and enforcement agencies to curb the misus e of this crisis by the Cartels through hoarding or selling it in black on expensive rates to the general public?
10. The commission shall examine the quantity of storage of last one year of each company , if the storage was less than the required limit and capacity , what action was taken by the authority on this deficiency?
11. Whether any summary was moved by OGRA to increase the prices on 26.06.2020, if not then on whose recommendations rates were increased before usual date, how much petrol was supplied by all the companies throughout Pakistan after , by this increase, what financial benefits from 26.06.2020 to 01.07.2020 were derived?
12. Whether the Government of Pakistan has any strategic storage for the public to cope emergency situation? If not, is there any planning for establishing the strategic storage for public in future? What will be the strategy to cope with such unpleasant situation in future?
13. Whether there is any need of comprehensive policy to take the provinces on board in order to enforce the laws dealing with the petroleum issues?
14. To suggest short term as well as long term measures to ensure that such shortage or manipulation, if any, does not recur .
15. Any other issue deemed appropriate or relevant to the above ToRs.
10. Vide Notification No.1/05/2020 Lit-III dated 28th July, 2020, Federal Government constituted the Commission hereinafter shall be referred as (the Commission) under the chairmanship of Mr. Abubakar Khudabakhsh, - Additional Director General FIA, which included representative of Attorney Genera l for Pakistan, representative of Intelligence Bureau, Representative of FIA, Director General, Anti-Corruption Punjab, Mr. Rashid Farooq, Former DG Oil, Petroleum Division and Mr. Asim Murtaza, C.E.O. Petroleum Institute of Pakistan. It is, however , worth mentioning that the last two members did not join the proceedings while showing their inability on account of personal/health reasons. The Commission also co-opted certain members. The Commission made an indiscreet probe while taking on board all stakeholders. After considering and evaluating all the facts and circumstances within the mandate of ToRs, the Commission made recommendations which can be summarized as under:-
1. OGRA Strongly recommends dissolution of OGRA within next six months. Also recomm ends punishment for those who were involved in illegalities, unlawful marketing, license permission.
2. MoEPD Ministry of Energy (Petroleum Division)
Commission recommends that to get out the present predicament of utter confusio n, MoEPD must be empowered to take the matter into its own hands with consolidated approach. The oil industry can be straightened with the unified authority . Draft new rules within 6-12 months with the approval of cabinet/PM. The departmental penal action may be taken against incumbent DG Oil for passing illegal orders.The departmental penal action be taken against Mr. Imran Abro working without any legal ground for the term of 6 years on behalf of his superior .The departmental action against the Secretary of MoEP be taken for failure to render explanation with regard to petroleum crises during June 2020.
3. Penalty for OMCs for June Crises The Commission recommends that the unlawful gain must be recovered from the OMCs by the Federal Government as these profits rightfully belonged to the general consumer at large.
4. Establishment of a monitoring cell The Commission recommends that a monitoring cell must be established in MoEPD. The cell should collect all relevant data from OMC's.
5. Invoking the role of Deputy Commissioner/District Administration To inspect and examine any premises, facility or installation on or operated by an OMC or refinery and to conduct enquiry so as to find any infractions or violation, is the duty of Deputy Commissioner under Rule 54 of Pakistan Oil Rules, 2016.
6. Closing of illegal retail outlets The Commission recommends that all the illegal outlets must immediately be closed down while simultaneously initiating action not only against their owners but also against those who allow them to prosper .
7. Establishment Strategic Storage The Commission recommends that focus of the policy formulators on the enhance ment of strategic storage (both crude oil and refined products) of the country remained amiss be it the MoEPD or OGRA.
8. Automated Gauging System Automated Gauging System is the most important automation step that needs to be taken up, all storages must be fitted with digital censors. This system would also help in proper audit at the end of financial year and this would help cut huge tax leaks that reportedly exist in the oil. industry . Both smuggling and adulteration practices could almost be brought to a grinding halt once this is fully and ef fectively enforced.
9. Transportation The Commission recommends that all other private OMC's develop automated transportation system.
10. Revamping of PSO The Commission recommends that the Government of Pakistan (GoP) may settle the impending debt issues of PSO in due time to enable it to adopt modern working ways of a vibrant company . The Commission also recommends that PSO may be directed to take the lead in the aforementioned automated process.
11. Shell Model The Commission recommends that fair complaints of Shell may be properly addressed and redressed to attract other international players in the industry .
12. Price. Fixing Formula The Commission is of the view that the mechanism may be appraised after 6-months and the GoP may consider the same formula with average of 30 days instead of 15 days.
13. Abolition of import Quotas The Commission recommends that in future product review' meeting only quotas of local refineries be fixed as per the market shares of OMC's or as decided by the mutual deliberation of OMC's.
14. Smuggling and Adulteration The quantum of smuggling through Pak-Iran border has been approximated at Rs.250 million. The Government must sensitize the Frontier Corps (south ) to take strict measures at the Pak-Iran border to curb this colossal evasion of tax revenue. There is a dire need of mobile testing units, such units should routinely check quality of petroleum products in retail outlets and depots in their area of jurisdiction to curb this menace.
15. BYCO Case It is recommended by the Commission that operation of both the refineries of BYCO be halted henceforth and full- scale inquiry be opened.
16. Scrutiny of other Regulatory Bodies .
The Commission is compelled to recomm end that the Government may conside r getting the performance audit done of all such regulatory bodies (NEPRA, PEMRA, DRAP etc.). The people of Pakistan have a right to know whether their hard-earned tax money is being utilized properly .
11. It is pertinent to mention here that at one stage Mr. Salman Akram Raja Advocate appearing on behalf of OGRA had apprised the Court that proper facts were not brought on record; hence no action is required to be taken against. OGRA. When confronted learned counsel frankly conceded and ultimatel y agreed that once it is directed that before making any observation or taking any adverse action, the concerned agency or department shall hear all the relevant including OGRA, learned counsel agreed that with such an observation he will be satisfied and convinced that any of ficial or institution can be proceeded against after taking his point of view/af fording hearing.
12. The recommendations made by the Commission have been exhaustively gone through and evaluated on judicial parlance. These have been found just and within the mandate of the Commission, as well as, proportionate to the prevailing crises. In the light of the supra recommendations by the Commis sion, following directions to the Cabinet Division of the Government are being issued so that future incidents of like nature may be eluded:- i. It is made clear that inquiry report of the Commission is just a fact finding report and for further necessary action if any company , institution/party feels necessary to proceed adverse against anyone it must take the view point of all concerned. ii. The Federal Government is directe d to make necessary arrangements for the implementation of the recommendations proposed by the Inquiry Commission reproduced above. iii. The Federal Government shall form a committee for recovery of unlawful gains from the OMCs. The committee so formed shall take point of view of all concerned and in case it comes to the conclusion that recovery has to be effected from OMCs, it shall design/draft mechanism for its materialization. iv. The Federal Government shall take steps for the audit of all OMCs and in the light of such audit report if required, a committee or sub-committee shall be constituted to examine the existing rules and regulations, which in the facts and circumstances may propose amendments/recommend new legislation. v. In case need arises, a committee/sub-committee shall be formed to examine (sic) vi. The Federal Government must culminate legal action against those who were involved in mal practices of whatsoever nature or found responsible for creating the shortage crisis. vii. in future Federal Government shall ensure that strategic storage is preserved in all eventualities. viii. The Federal Government is directed to ensure the release of the report of the Commission regarding the artificial shortage of petroleum products immediately . ix. The Federal Government is directed to submit compliance report within three months with regard to steps taken by it to the Additional Registrar (Judicial) of this Court. x. The Chief Secretaries of the respective provincial governments are directed to take effective steps to empower the District Administration for better role to cater with such like situation. xi. The Government shall examine the report of the Commission qua dissolution of OGRA through a high powered committee, however , if such Committee concludes that OGRA should remain in field then immediately the rules relating thereto must be revisited and fresh rules/regulations be framed and the authority should closely watch the working of OGRA and other autonomous bodies. In case of any lapse, the concerned officers/of ficials must be taken to task.
13. In the light of above referred direct ions Writ Petition No.25669/2020 and Writ Petition No.26868/2020 are disposed of accordingly .
14. Before parting with the order this Court deems essential to appreciate the assistance rendered by learned counsel for the parties, learned Deputy Attorney General, learned amicus curiae, Mr. Azhar Siddique, Advocate as well as, Members of the `Commission ' particularly its `Chairman'. Admittedly the time-frame given to the `Commission' to probe/dig out the issue was very short while facts were gigantic wherein big-guns were involved.
Evaluation of all the facts in such a short time and formulating recommendations in the shape of a comprehensive report which may help to articulate policy guidelines for the Federal Government reflects the capacity of the Chairman of the Commission, which is applauded.