Rupee fall may hike imported fuels prices

KARACHI: A massive depreciation of almost five rupees in the local currency against dollar is estimated to add around Rs5-6 in the prices of diesel and petrol in the coming fortnight, The News learnt on Tuesday.

Pakistani currency lost Rs4.91 in the last two consecutive sessions when the dollar closed at Rs202.83 at the end of trading on Tuesday against the closing of Rs197.92 at the weekend on last Friday. According to the information gathered from the oil sector, the currency depreciation would add to the cost of diesel and petrol, whose prices were fixed in line with their international prices.

Country is largely dependent on the import for meeting domestic requirements of both the fuels and imported crude oil as well as refined diesel and petrol.

In the previous fortnight, the prices of diesel and price were calculated on average dollar-rupee parity of Rs200.31.

However, further devaluation of rupee against the dollar will add to the cost of imported diesel and petrol and crude oil in the coming days.

Pakistan is currently grappling with the high prices of petroleum products in the international market and after freezing the price for more than two and half months, the government raised the prices of diesel and petrol massively twice by Rs30 each. Currently the price of petrol is Rs209.86/litre and that of diesel Rs204.15/litre.

Pakistan’s oil sector is feeling the heat of high exchange rate as the needed payment of oil imports has been surging constantly. “The opening of LCs (Letters of Credit) for cargo of crude oil that used to cost Rs6 billion has now soared to Rs10 billion due to depreciation of local currency,” an official of an oil company told The News.

He said that reports of foreign banks not opening LCs didn’t carry any substance. “Foreign banks only confirm the LCs and the cash margins requirements are needed by the local banks and not by the overseas lenders,” the official said. He said actually local banks had raised their cash margin requirements. “If they have committed to provide only Rs6 billion they seek the same amount as cash margin for opening the LC.”

“Even if the global crude oil prices reduce in the coming months, bringing the local petroleum products prices down will become too difficult for the government if the rupee does not recover against the dollar,” the official said.