Railways mulls end of contract with Pakistan State Oil

The Pakistan Railways (PR) is considering a proposal seeking termination of service contract with its oil supplier— the state-owned Pakistan State Oil (PSO)—and joining hands with any private sector oil marketing company (OMC) for better services in future.

Keeping in view recommendations of a third party forensic audit, the Railways has also decided to modernise its all 14 fuel storage sites including their maintenance in collaboration with the OMC pledging for the provision of best services in this regard, Dawn has learnt.

“We have various issues with our existing oil supply vendor (Pakistan State Oil). These include tax (at source) deductions, oil supply, price etc. Therefore, we have decided to explore other options that could ease our huge passenger and goods train operation,” Farooq H. Sheikh, Pakistan Railways Adviser (Marketing), told Dawn on Thursday.

The Railways requires 1.5 million litres of oil worth Rs20 billion annually (for its passenger and freight train operation) that is 30 per cent of its total operational cost. Around 70 million passengers use railways for travel in a year and several freight companies use railways for goods transportation, the department has 14 sites where the locomotives’ fuel tanks are filled. Three sites are situated in Karachi, Sukkur and two each in Quetta, Multan, Lahore, Rawalpindi and Peshawar.

The PR, according to Mr Sheikh, got conducted a third party evaluation/audit of the aforementioned sites and identified various loopholes/leakages causing around Rs1.5bn loss to its revenue. These included outlived fuel storage tanks, absence of modern fuel dispensers, improper calibration, fuel theft, wastage and absence of a performance based and technology driven system.

“Actually under our new transformation policy, we plan to outsource our entire freight train operation and desire to take it on a position of the time when we, once, were the market leader by having 73pc share in the freight business in Pakistan that has now squeezed to just 8pc,” the official explained. “And since the fuel is our major operational cost, we want to plug all leakages on top priority basis,” he added.

The adviser said the Railways has been getting supplies from PSO since long. However, with the changing scenario of best business practices, its services are not up to the mark. That is why the PR administration had a very important meeting with the management of a major private sector OMC (Total Parco).

During meeting held on Thursday, the PR authorities headed by CEO Nisar Memon briefed the visiting delegation about requirements related to the sites. These included replacement of the outlived storage tanks, installation of fuel dispensers and tracking devises, oil prices, maintenance of the equipment etc.

“If we find their (Total Parco) offer feasible in line with a transparent and accountable, customer centric, performance based and technology driven system, we may decide to start getting oil supplies from them after completing necessary legal formalities,” he said.

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