ISLAMABAD: The federal government has reconstituted the Board of Directors of Pak-Arab Refinery Company (PARCO), retaining a federal minister and most of the existing bureaucrat-directors for another three-year term despite ongoing debates over governance reforms and board appointments in state-linked enterprises.
Under the new board composition approved by the federal cabinet, Pakistan has nominated six directors, while the remaining four seats are held by representatives of the United Arab Emirates, which owns a 40% stake in the company. Of the six Pakistani nominees, five existing directors have been reappointed, with only one change made.
Grade-22 Pakistan Customs Service officer Rabab Sikandar Sultan has replaced Jahanzeb Khan on the board. Her appointment comes as the only alteration to the previous board, while all other Pakistani directors have been retained for another three years.
The reconstituted board includes Secretary Petroleum Hamed Yaqoob Sheikh, who will continue as Chairman, and Secretary Finance Imdadullah Bosal, both serving as ex-officio directors. Federal Minister for Economic Affairs Ahad Khan Cheema has also been reappointed, while FBR Chairman Rashid Mahmood Langrial has been nominated in his personal capacity rather than as Secretary Revenue, despite the Board Nomination Committee recommending him in his official role.
The newly constituted board is scheduled to hold its first meeting in Vienna, Austria, on July 2. Board members are entitled to receive a meeting fee of US$3,500 per session. However, it remains unclear whether the directors will receive the payment for the upcoming meeting in light of the Prime Minister’s efforts to curb board remuneration. Any changes to the fee structure would require approval through a formal board resolution.
Strategic Role and Financial Performance
PARCO remains one of Pakistan’s most strategically important integrated energy companies, jointly owned by the Government of Pakistan (60%) and Abu Dhabi Petroleum Investment Company (40%). Although the company is not legally classified as a state-owned enterprise (SOE) under the SOEs Act, 2023, the Ministry of Finance continues to monitor its financial performance and governance.
According to the Ministry of Finance’s latest report on state-owned enterprises, PARCO experienced a significant deterioration in financial performance during FY2024-25. Net sales declined by approximately 15%, falling from Rs1.14 trillion in FY2023-24 to Rs965 billion in FY2024-25 due to lower international crude oil prices, reduced refinery throughput and subdued domestic demand, particularly for diesel and furnace oil.
Net profit after tax also dropped sharply by nearly 60%, decreasing from Rs55.1 billion to Rs22.2 billion, reflecting weaker refining margins, rising financing costs and challenging market conditions.
Operational Challenges
The finance ministry identified several structural risks affecting PARCO’s performance, including heavy reliance on imported crude oil, exposure to exchange rate volatility, the absence of oil price hedging mechanisms and increasing finance costs in a high-interest-rate environment. The report also highlighted reduced refinery utilisation, lower throughput levels and substantial dividend payouts during periods of declining margins, which placed additional pressure on the company’s liquidity.
Despite these challenges, PARCO’s joint venture investments continued to generate healthy dividend income, partially offsetting the impact of a difficult operating environment.
Governance Debate Continues
The reconstitution of the PARCO board comes amid continued debate over the appointment of serving bureaucrats to the boards of public-sector and government-linked companies. The government has previously attempted to cap the annual board remuneration of serving civil servants, but those efforts have yet to produce lasting reforms.
Several bilateral financial institutions, including Pak-Brunei Investment Company, Pak-Kuwait Investment Company, Pak-Oman Investment Company and Saudi-Pakistan Industrial and Agriculture Investment Company, also continue to have boards dominated by serving and retired bureaucrats, with board fees substantially higher than those offered by many conventional state-owned enterprises.
Story by Shahbaz Rana
