Rs40bn released for oil subsidy payment

KARACHI: Ministry of Finance (MoF) has released Rs40 billion for the payment of fuel subsidy to the oil sector, which industry officials dubbed as not enough, given the magnitude of their liquidity challenges, The News learnt on Saturday.

The Ministry of Energy (MoE) will transfer the amount to Pakistan State Oil (PSO) account through Account General Pakistan Revenues (AGPR) in the next one to two days.

The government is paying price differential claims (PDC)to oil marketing companies (OMCs) and refineries for selling diesel and petrol at lower than their actual prices to cushion the citizens from the shocks of high international petroleum markets.

The relief package on diesel and petrol was announced by former Prime Minister Imran Khan on February 28, 2022 and the new coalition government led by Pakistan Muslim League-Nawaz (PML-N) has decided to continue with it.

Though the International Monetary Fund has tied the next tranche of the $6 billion programme, which is currently stalled, to the abolition of fuel subsidy, the new government, having no choice, is continuing with it for April.

Few days back, the Economic Coordination Committee (ECC) of the Cabinet approved Rs69 billion for immediate reimbursement of PDCs to the oil industry.

ECC also sanctioned a supplementary grant of Rs68.74 billion for payment of oil subsidy to OMCs and refineries for April and to meet the shortfall of March, according to an official announcement.

The former prime minister on February 28, 2022 announced a relief package that included a reduction in the consumer price of petrol and diesel by Rs10/litre with the commitment to keep the prices frozen till the end of the fiscal year.

According to Oil & Gas Regulatory Authority (Ogra), PDCs projected for the first and second fortnight of April are Rs31.80 and Rs34.94 billion respectively.

Sources in the oil sector said Rs40 billion out of the almost Rs67 billion PDCs for the month of April had been released and would be transferred to OMCs and refineries after reimbursement of Ogra approved claims for 1-15 April, starting from Tuesday.

“This payment will improve the cash flow position of oil sector companies that want quick release of the amount to import the petroleum products for domestic needs,” sources added.

Oil slipped on Friday, posting a weekly loss of nearly 5 percent, on the prospect of weaker global growth, higher interest rates and COVID-19 lockdowns in China hurting demand even as the European Union considers a ban on Russian oil that would tighten supply.

Brent crude settled down $1.68, or 1.6 percent, at $106.65 a barrel. US West Texas Intermediate crude declined $1.72, or 1.7 percent, to $102.07.