Thursday June 30, 2022

Oil sector seen slipping into financial crisis

April 05, 2022

KARACHI: Country’s oil sector is hotfooting towards a serious financial crunch as the government seems dragging feet on the payment of price differential claims (PDCs) to refineries and oil marketing companies (OMCs) against keeping fuels prices stable, officials said on Monday.

According to industry sources in the sector, the government has partially paid the amount of PDC for November 01 to 04 2021 when prices were kept unchanged for four days. “The oil sector companies have not fully received the PDCs worth Rs1.50 billion for those four days of November, while some of them have not been paid any amount at all,” sources said.

According to a letter of Pakistan State Oil (PSO), almost Rs500 million have been paid to various oil sector companies on account of PDC for the four days of November 2021, whereas the amount of PDC for March 01 to 15 came to Rs200 million

Sources revealed that PDC for the last fortnight was worked out at Rs31 billion and for the current it came out at Rs36 billion. The PDC on diesel is Rs41.43/litre for this fortnight and on petrol it is Rs24.7/litre, they added.

“The PDC amount is piling up fast but the payments were not gathering pace, making the financial conditions worse for the oil sector,” said a top executive of a refinery that was yet to receive its share of PDC payment from the government.

As per the mechanism approved by the government, refineries and OMCs will submit claims of PDC fortnightly, based on procurement (import & local refineries) of the petroleum products category-wise, supported with relevant documents duly certified by external auditor of OMCs/refineries to OGRA.

Refineries and OMCs will subsequently share sales tax documents with OGRA as soon as submitted with FBR for audit within three days after fortnight.

OGRA will review PDCs and PSO transfer the amount from the assignment account to designated accounts of commercial banks of respective OMCs and refineries.

According to industry officials, so far the amounts are not being released as per the commitment and political situation in the country is making matters worse for the oil sector. “No one knows when this political crisis will end. All the issues including oil companies’ receivables are now on the back burner amid upwardly volatile global oil and fuel market,” the sources said.