Monday October 03, 2022

Rs11.73 billion for oil subsidy payment approved

April 16, 2022

KARACHI: An amount of Rs11.73 billion has been authorised for clearing oil marketing companies (OMCs) and refineries’ price differential claims (PDCs) for March 2022 against selling fuels at rates capped the ousted PTI-led regime had capped for until budget.

According to a letter from the Ministry of Energy, the amount has been sanctioned to be placed in the assignment account for reimbursement to OMCs and refineries.

This amount is in addition to Rs20 billion already paid to the oil sector for holding the prices of diesel and petrol at lower level under the former government’s relief package.

The Oil Companies Advisory Council (OCAC) in a recent communication complained to the government that authorities were still sitting on an approved subsidy payment of Rs11.73 billion for March 16-31, 2022 period, demanding it be transferred at the earliest to keep the supplies smooth.

It said the majority of the industry’s claims for March 16-31, 2022 had already been submitted to OGRA (Oil & Gas Regulatory Authority) but payments were lying in limbo. “Urgent disbursement of the allocated amount (Rs11.73 billion) is imperative to ensure reimbursements to the industry,” the letter added, citing the severe cash flow constraints the industry was facing currently.

According to the oil industry body, the government also didn’t approve allocation of funds for April 1-15 fortnight and as per sector estimates, the total amount of PDCs for the current month would be around Rs55 billion if prices remain frozen for the entire month.

OGRA sent a summary to the government for an increase in the prices of petroleum products a day earlier by calculating their estimates with and without taxation on petroleum products.

The summary has been prepared on two counts for the next revision of the petroleum products prices.

The first part is based on zero sales tax and petroleum levy (PL) and the second is calculated with 17 percent sales tax and Rs30 PL.

On the basis of the first part, if the government passes on the impact of global oil prices to local consumers, the diesel price is likely to go up by 51.52 to 195.67/litre, petrol by Rs21.30 to 171.16/litre. Kerosene by Rs36.05 to Rs161.61/litre, and light diesel by 38.89 to Rs157.20/litre.

On the basis of second part that included sales tax and PL, diesel’s price will rise by Rs119.88 to Rs264.03/litre, and petrol by Rs83.50 to Rs235.36/litre, kerosene by Rs77.56 to Rs203.12/litre, and light diesel's price will increase by Rs77.31 to Rs195.62 per litre.