KARACHI: The Petroleum Division, Ministry of Energy, has proposed Rs20 billion initially as supplementary grant for payment of Price Differential Claim (PDC) to the oil marketing companies and refineries to avert any shortage of petroleum products as apprehended by the oil sector in the wake of price cut announced by the prime minister on February 28.
In a summary sent for approval to the Economic Coordination Committee (ECC) and the Federal Cabinet, the Petroleum Division has proposed a mechanism for PDC payment in the wake of government’s decision to keep the prices unchanged till the next federal budget.
The division has formulated a special PDC payment procedure in consultation with the industry, Oil & Gas Regulatory Authority (OGRA) and the Finance Division to pay the PDC speedily in 15 days after closure of the fortnight to which it pertains.
It proposed that a Special Assignment Account may be opened with Pakistan State Oil (PSO) to be used for withdrawal of PDC by PSO for its own claims and issuance of PDC claims to the other OMCs/ refineries according to the proposed mechanism.
The OGRA has been requested to estimate the amounts required for PDC payment for November 1-4 period, the current fortnight and the next fortnight, and proposed that initially an amount of Rs20 billion may be provided through a Supplementary Grant to PSO.
The proposals for further supplementary grants would be submitted to the ECC in view of the anticipated requirements as and when required, the summary proposed. According to the summary, oil prices have been increasing in the international market since September 2020, substantially increasing the consumer prices of petroleum products in the country.
To provide relief to people, the prime minister announced a relief package on February 28. 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.
Following the PM’s directive, the prices of Motor Gasoline and High Speed Diesel were fixed at Rs149.86 per litre and Rs. 144.15 per litre respectively on February 28. The summary also noted that the prices of cargoes in the international market are increasing, pressuring industry's working capital requirements. Any delay in the processing of the PDC could stretch industry’s credit limits to an unsustainable level.
The summary proposed that to avert any shortages in the market, it is imperative to provide confidence to the OMCs and refineries that any price differential during a fortnight would be provided to them promptly, facilitating them to continue smooth procurement from the international market.