After the State Bank of Pakistan’s intervention, banks have agreed to increase the credit ceiling of oil marketing companies (OMC) to import petroleum products to meet the country’s needs.
The development comes after SBP Governor Reza Baqir held a meeting with Oil and Gas Regulatory Authority (Ogra) Chairman Masroor Khan and Member (Oil) Zainul Abideen Qureshi.
The central bank’s governor confirmed that credit lines for the OMCs had been revisited to help meet the import needs of petroleum products.
Earlier, the Oil Companies Advisory Council (OCAC) had requested the SBP to intervene and ask banks to jack up the credit limit for oil imports.
The OCAC had pointed out that after an FIA inquiry against a refinery, banks have shown reservations in providing the credit facility, warning that high-speed diesel reserves were depleting and an oil crisis could land the country in trouble. Pakistan is a net oil importer and counts heavily on imports. Oil companies have to import petrol, diesel and jet fuel to meet domestic demand.
Earlier, the Federal Investigation Agency (FIA) had asked major banks to do business with scrupulous OMCs and refineries after they exhibited reluctance to extend credit limits to them following an investigation against officials of the National Bank of Pakistan (NBP) and a particular oil marketing company.
In a letter written to presidents of all major commercial banks, the FIA had said that it was conducting a criminal investigation against NBP officials for their alleged involvement in facilitating M/S Hascol Petroleum Limited with malafide intention, resulting in a loss of billions of rupees to the bank through malpractices.
“The investigation conducted so far reveals criminal negligence on the part of the bank to follow prudent banking practices. The basic purpose of the investigation is to fix responsibility and ensure conviction of the those involved in criminal acts,” the FIA letter had said.
It had said that “further to obviate the risk of avoidable loss to the public exchequer in the future and at the same time to raise the bar of due diligence and regulatory scrutiny/oversight at the appropriate fora”.
The FIA letter further said: “recently, this agency is informed that banks are showing hesitation in doing business with OMCs apparently due to the above-referred investigation undergoing in this agency.”
It said that “in this connection, it is to reassure that this agency fully supports any and all efforts of the banking industry to enter into any restructuring of its exposure to HPL as it deems fit as per law.”
“This agency also unequivocally assures all the concerned that this investigation has been and shall continue to be conducted with the highest professional standards and should not be a source of concern to those not guilty of misconduct/breach of trust,” the FIA letter had concluded.
Earlier, former Prime Minister Imran Khan announced a reduction of Rs10 per litre on all petroleum products for four months and the prices will remain in place till the new financial year.
The government has already released over Rs40 billion to oil marketing companies for the month of March and April after the OMCs threaten to stop the import of the commodity owing to the higher global oil prices.
Earlier, the OCAC had called for formulating a fortnightly mechanism for the early reimbursement of the “funded subsidy” agreed by the government.
The oil sector had cautioned of the oil crisis in the country in the wake of the lowering of the price of petroleum products by Rs10 per litre without a backup plan for making out for the losses of the oil companies.
In a letter, the OCAC had demanded payment of 95 per cent of PDCs within 10 working days. It had said that the rest of the 5 per cent payment should be released after the internal verification by the regulator.
The OCAC had said that the management of cash flows is critically challenging for the oil companies owing to “insufficient margins”, rupee-dollar parity, constraint financing facilities, circular debt, outstanding PDCs since 2004 and other external factors such as geopolitical situation, high premiums etc. It said that the sooner the decision is approved and implemented, the quicker will be the redressal of already constricted working capital constraints faced by the oil industry.