ISLAMABAD: Secretary Petroleum Division and Oil and Gas Regulatory Authority (OGRA) chairman on Wednesday assured the oil companies that a fortnightly mechanism for payment of the Price Differential Claims (PDC) will be developed soon in consultation with the Finance Ministry.  Â
Sources privy to the development informed that a meeting to resolve the concerns of oil industry regarding payment of PDC was held on Wednesday where Secretary Petroleum Division Ali Raza Bhutta, Chairman OGRA Masroor Khan and representatives of Oil Marketing Companies (OMCS), refineries and Oil Companies Advisory Council were in attendance.
Sources said that Secretary Petroleum and OGRA chairman assured the oil companies that they will raise the issue of PDC with the finance ministry and will come up in a few days with a fortnightly payment mechanism of PDC. They said that OMCs have also complained regarding pending PDC of 2004 and insisted to resolve the overall PDC issues of oil companies due to their cash flow problems.
They said both the Secretary Petroleum and OGRA chairman assured to develop an early payment mechanism for clearing the PDC of the oil companies. The two officials (Secretary Petroleum and Chairman) have assured that a mechanism for payment of PDC will be developed and shared with the oil industry before it is implemented, said sources.
“They assured to revert in a few days”, said the sources.
When contacted, a senior official of oil industry who was also present on the occasion said on condition not to be named that no certain deadline to clear the PDC of oil industry was given in the meeting while only bureaucratic promises/reply were made to appease the oil industry.
“You know how the Ministry of Energy (MoE) and OGRA works”, said the official.
The Oil Companies Advisory Council (OCAC) in a letter dated March 1, 2022 to Secretary Petroleum requested to remove the Price Differential Claim (PDC) by revising petroleum product prices immediately or develop an alternate subsidy mechanism in order to avoid imminent petroleum shortage of the petroleum products in the country.
OCAC also requested for an urgent meeting within the next few days with industry representatives to appraise the current precarious situation and challenges being faced by the oil industry and to save the country from imminent shortage of the petroleum products.
It is noted with deep concern that PDC has been imposed despite the fact that OCAC had highlighted the critical condition of the industry.
OCAC, vide its letter dated February 3, 2022 had requested the ministry’s support in avoiding further imposition of PDC as the same will have an untenable impact on industry’s cash flows which would lead to catastrophic disruption in the POL supply chain of the country, said OCAC letter to Secretary Petroleum.
According to OCAC, the current PDC on HSD will create a receivable of approximately Rs 1 billion during the first fortnight of March 2022 which will add to the previous receivable of Rs 2.6 billion pertaining to November 1-4, 2021 and Rs 10 billion pertaining to 2004-2008 thereby further aggravating the financial challenges being faced by the industry.
The OCAC also highlighted that the industry has already been facing severe financing issues caused by increasing international prices, devaluation of PKR vs US$, high import premiums and circular debt of around Rs 1.3 trillion.
The OCAC further said that in order to ensure uninterrupted supplies and to manage working capital requirements, the industry had already requested the State Bank of Pakistan (SBP) to support in enhancement of their credit/financing limits; a meeting was held on February 28, 2022 and sensing the gravity of situation the Governor SBP has constituted a committee of leading banks to urgently provide their proposal in this matter.
As per OCAC, the decision to maintain prices at current level till July 2022 will lead to further build up of PDC for HSD and MOGAS as the international prices are on the sharp rise due to the current geopolitical situation.
If the local consumer prices are not aligned with the international market and PDC regime is continued, the industry will not be able to sustain and this will lead to severe supply chain disruption more so during the upcoming harvesting season resulting in a grievous crisis of petroleum products shortage similar to what was faced in June 2020.
Further, it will have a serious adverse impact on the business continuity of a number of companies in the industry.
