Unpaid Rs107 billion claims deepen liquidity strain on oil marketing companies

ISLAMABAD: Oil marketing companies in Pakistan are facing a severe liquidity crunch as unpaid price differential claims amounting to as much as Rs107 billion remain outstanding, according to industry estimates cited by officials and sector representatives.

The issue centres on reimbursements owed when the government keeps fuel prices below procurement cost. In such cases, the resulting gap is to be paid back to oil marketing companies through price differential claims, or PDCs. However, delays in these payments have left companies under growing financial pressure.

Industry estimates indicate that an initial claim of about Rs27 billion, submitted in mid-March, was only partly paid. Subsequent claims valued at between Rs70 billion and Rs80 billion have not been paid at all. Taken together, the unpaid amount has pushed companies into operating with extremely limited margins and has made it increasingly difficult for them to manage cash flow.

Officials said the core problem was not a lack of transparency, but uncertainty in the process. According to them, whenever oil marketing companies move to meet the required conditions, the Oil and Gas Regulatory Authority introduces additional documentation requirements, causing the process to begin again.

These requirements have included invoice-level reconciliations as well as repeated certifications from chief executive officers, chief financial officers and auditors. A revised format was circulated as recently as Monday night, but industry participants said there was still no certainty over whether more changes would follow.

A senior industry source said, Each time the industry prepares to comply, a new requirement arrives. There is no finishing line in sight, while also noting that some audit firms may decline to participate because the demands fall outside the normal scope of audit work.

Concerns over further withholding

The situation could become more difficult if Ogra moves ahead with a proposal to retain 10% of PDC payments until tax reconciliation is completed with the Federal Board of Revenue. Industry estimates suggest that such a step could tie up another Rs7.4 billion for as long as two months.

Sector representatives say the prolonged delay is forcing companies to cover the shortfall through borrowing, adding further strain to their finances. With liquidity continuing to weaken, industry officials have warned that the problem could eventually affect fuel supplies.

The sector has asked the Ministry of Energy to step in and has called for immediate payment of outstanding dues. It has also sought a single, consistent documentation framework and the withdrawal of the proposed plan to withhold part of the PDC amount.

The dispute comes at a time when companies say repeated changes in compliance requirements are making it harder to predict when, or under what conditions, payments will be released. Industry officials maintain that without a clear and stable mechanism, the financial burden on oil marketing companies will continue to grow.