The government will bear the brunt of another Rs23 billion as subsidy for the first fortnight of April to maintain the existing petroleum prices as Brent crude lost more than $4.50 a barrel in the international market as China started to implement a city-wide lockdown in Shanghai, an important financial and manufacturing hub.
Earlier, 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 Rs28 billion to oil marketing companies for the outgoing month of March after the OMCs threaten to stop the import of the commodity owing to the higher global oil prices.
Oil prices remain almost 80 per cent higher than it was a year ago after the war in Ukraine helped to drive up prices.
Earlier, the Economic Coordination Committee (ECC) of the cabinet had approved an Rs20 billion subsidy for oil marketing companies (OMCs) and refineries to ensure the uninterrupted supply of petroleum products in wake of soaring global prices of the commodity.
The ECC had approved the subsidy to the OMCs and four refineries at a meeting chaired by Finance Minister Shaukat Tarin.
The Ministry of Energy (Petroleum Division) had submitted the summary on reimbursement of price differential claims (PDCs) of OMCs and refineries, in line with the PM relief package of reduction in the consumer prices of motor spirit and diesel by Rs10 per litre. The price differential claim would be paid to the oil marketing companies and refineries by the government as a subsidy to avert any shortage of petroleum products in the market. The ECC approved a special PDC disbursement mechanism to pay the PDC speedily within 15 days with the opening of a special assignment account with.
Earlier, the Oil Companies Advisory Council (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.