The Oil Companies Advisory Council (OCAC) has demanded that the government immediately remove the newly imposed price differential claim (PDC) of Rs2.28 per litre on high-speed diesel (HSD).
In a letter written to the Oil and Gas Regulatory Authority (OGRA), OCAC Secretary-General Syed Nazir Abbas Zaidi said that the PDC “will have an untenable impact on industries cashflows, which will lead to catastrophic disruption in the POL supply chain of the country”.
The letter said that “the current PDC on HSD will create a receivable of approximately Rs1 billion during the first fortnight of March 2022. This will add to the previous receivable of Rs2.6 billion pertaining to November 2021 and Rs10 billion pertaining to 2004-2008, thus further aggravating the financial challenges being faced by the industry”.
The letter said that “the industry is already facing severe financing issues caused by increasing international prices, devaluation of rupees against the dollar, high import premiums and a circular debt of around Rs1.3 trillion”.
The letter said that “with the increase in Jet fuel demand in 2021-22, global refineries are producing more jet fuel to cater to the demand, which, in turn, will reduce the availability of HSD”.
The letter said that currently, EU refineries are operating on lower-than-normal output, as jet fuel premiums are more attractive than HSD, thus prompting refineries to enhance Jet fuel production and reduce HSD output and availability.
The letter further said that “China has also banned the export of HSD while HSD prices are higher than gasoline prices internally, a phenomenon not seen in the last 18 months”.
The letter said that during March-June, the harvesting season will be in full swing, thus availability constraints will further push HSD prices and importing countries will struggle to procure the product”.
The OCAC letter further said that “if the local consumer prices are not aligned with the international market and PDC regime is continued, the industry will not be able to sustain and this will lead to a severe supply chain disruption more so during the upcoming harvesting season resulting into grievous crises of petroleum products shortage similar to what was faced in June 2020. Further, it will have a serious adverse impact on the business continuity of a number of companies in the industry”.
It said that “in order to avoid shortage of petroleum products, the PDC element should be removed by revising petroleum product prices or an alternative subsidy mechanism should be found”.
The letter also called for an immediate meeting with oil industry representatives to discuss “the current precarious situation and save the country from the imminent shortage of petroleum products”.
