OMAP asks OGRA for fair distribution of forex losses

KARACHI: Oil marketing sector has asked the Oil and Gas Regulatory Authority (OGRA) to review the allocation of quota in its product review meeting as the current distribution was unfair.

“If you gathered data from all oil marketing companies (OMCs), it will show that the sale of certain companies shoots at the time of adjustment and drops in normal days. The companies based on the sale of 100 percent imported product should be entitled more as compared to the companies based on mixture of local and imported products,” Oil Marketing Association of Pakistan (OMAP) proposed in a letter to OGRA chairman on Monday.

OMAP pointed out that there were various flaws in the adjustment and distribution mechanism of foreign exchange losses, due to which a huge amount was disbursed against lower entitlement.It should be mentioned that in the recovery of forex losses, sale plays a vital role, as it is based on the sale volume.

If done in true letter and spirit, distribution of forex losses was the right of the importer that actually incurred losses based on forex rate difference. But this important factor is ignored while distributing forex losses and it is uniformly disbursed without calculating the sale ratio of imported and local product.

Hence a huge amount is disbursed to the non-entitled product. The OMAP letter asked who was responsible for this blunder and who would bring it to the knowledge of the federal government? “We assume this is OGRA’s domain,” the letter read.

It said that time lapse was another important factor in it. Credit letter opening, import, retirement of the credit letter, and disbursement of forex losses, all have a long timeline, which makes full recovery practically impossible.

Speed of recovery of the losses was much slower than the pace at which the losses were incurred, it said, adding that the association has been raising this issue for the last six months. OMAP said that the emerging OMCs had not recovered around Rs25 billion losses, which hit their profits.

It was discussed in detail and agreed in a meeting that forex losses should not hit the profit and loss of any company, “but on the contrary it is happening”. It is OGRA’s sole responsibility to inform the government about these heavy losses of emerging OMCs

and suggest rectification, the letter noted.

OMAP urged OGRA to seek data from OMCs to see the position of losses and verify the claims. The association said that the best way to deal with the distribution of forex losses and overcome all financial ambiguities, was the formation of a pool system.

The creation of a pool will not only ensure fair distribution of forex losses but it will also curb the disbursement of wrong disbursement while considering the ratio of imported and local product, it added.

It also urged OGRA to make policies based on equality and fair play when it comes to 60-day or 40-day credit letters. OMAP asked OGRA to recommend and formulate such polices that create ease of doing business for OMCs, to stop discriminatory practices, and to provide equal opportunities for all the industry stakeholders.