Oil marketers call for saving industry

The Oil Marketing Association of Pakistan (OMAP) has urged the Oil and Gas Regulatory Authority (Ogra) chairman to save the oil industry from the looming financial crisis following excessive depreciation of the rupee.

Highlighting the matter in a letter written to the Ogra chairman, OMAP sought the authority’s prompt action for the resolution of the issue in order to shield the industry from failure.

OMAP Chairman Tariq Wazir Ali, in the letter, stated that the recent depreciation of Pakistani rupee had not only affected the national economy, but the oil industry as well.

The industry, which was already struggling, would now face a loss of billions of rupees as the Letters of Credit (LCs) rates would be settled but the products had already been sold.

“Although compensation is available in terms of foreign exchange losses for LCs up to 60 days using PSO as a benchmark, the industry has suffered since the increase in prices announced on January 29, 2023,” it said.

“The reason behind this suffering is that PSO is settling its HSD (high-speed diesel) LCs not on announced 60-day credit but its own defined credit of 30 to 45 days. Actual payable is cleared by the government later if PSO settles its obligation in less than 60 days. This should be passed on to the general public so that the industry may reduce its losses,” the letter read.

Furthermore, it said that previously Ogra used to put all the burden of rupee depreciation on the industry instead of passing it to the end-users, which also caused losses to the industry. Therefore, Ogra must pass on a lower burden of exchange rate to benefit the industry.

OMAP letter sought Ogra’s support to convince banks to increase the limit on trade finance/ LCs as per the current oil prices, volumes of companies and exchange rate.

Published in The Express Tribune, February 3^rd, 2023.

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