ECC approves additional Rs68.74 billion for PDC payment

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Tuesday approved another Rs68.74 billion in grants to cover the price differential claim (PDC) on fuel under petroleum relief package.

“The ECC after discussion approved supplementary grant of Rs68.74 billion for disbursement of PDC to OMCs (oil marketing companies)/refineries for the month of April, 2022 and to meet the shortfall for the month of March, 2022,” a government statement said.

Miftah Ismail, minister for Finance and Revenue, presided over the meeting of ECC. Minister for National Food Security and Research Makhdoom Syed Murtaza Mehmood, federal secretaries and senior officers also attended the meeting.

Petroleum division had submitted the summary for reimbursement of PDCs of OMCs and refineries. The price differential is to be paid by the government as a subsidy in the wake of its decision to keep the petroleum products’ prices stable.

The ECC in March approved a revised mechanism for reimbursement of PDC, under which the payment would be due on sale of petroleum products rather than procurement.

The statement said the quantum of subsidy for the month of April, 2022 has been higher than March, 2022 due to continuously rising trend of oil prices in the international market.

“Further, the previous government did not consider the PDCs for the first fortnight of April, 2022. Substantially, the present government has to bear the burden of higher quantum of subsidy as PDCs of the OMCs.”

Former premier Imran Khan announced a cut in petrol and electricity tariffs in February, despite soaring global prices, to provide relief to people. The package included a reduction in the consumer price of Motor Spirit and Diesel by Rs10 per liter and a commitment to keep the prices stable till the end of the fiscal year. The new government of Shahbaz Sharif had decided not to roll back billions in fuel subsidies for the time being despite the strain on public funds.

Reuters reported that the measure, estimated at Rs373 billion, has stretched government finances in a way that cannot be sustained. It has also endangered an ongoing International Monetary Fund rescue programme.

Business and trade bodies recommended the newly-formed government to withdraw fuel subsidies

In a letter sent to PM Sharif, the Pakistan Business Council (PBC) the government should withdraw the general subsidy on fuel, and replace it with targeted assistance through the Benazir Income Support Programme (BISP) to restore fiscal prudence, “Avoid further populist measures that also result in increasing inflation,” it added.