KARACHI – The Oil Companies Advisory Council (OCAC), which represents thedownstream oil industry in Pakistan, on Friday cautioned the governmentthat ongoing deprecation of the Pakistani rupee against the US dollar haspushed the oil industry to the brink of collapse.
In a letter sent to the Secretary Ministry of Energy- Petroleum Division,and chairman Oil & Gas Regulatory Authority (OGRA), the body has urged theofficials for an urgent meeting to discuss the situation.
“As you are aware, the sudden depreciation of the rupee has caused a lossof billions of rupees to the industry, whose Letters of Credits (LCs) areexpected to be settled on the new rates whereas the related product hasalready been sold,” the letter said.
It highlighted that oil industry suffered severe losses due to thefluctuation of the exchange rate, besides expressing fear that the lossescould exceed the entire year’s profit for the sector.
“It is requested that immediate steps to compensate the industry should bedevised,” said OCAC.
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It said that although compensation for foreign exchange losses is allowedfor LCs up to 60 days using PSO as a benchmark as per Economic CoordinationCommittee (ECC) approval of 1 April 2020, its member companies are unableto recover their entire losses due to import profile differences with PSO.
“It is requested to urgently revise this mechanism and ensure that exchangelosses of the sector are fully reimbursed if the viability of the industryand supplies to retail outlets are to be ensured,” said OCAC.
“As a result of the recent devaluation alone, the LC limits have overnightshrunk by 15-20%. In order to ensure import of adequate product into thecountry, it is important to increase the trade finance / LC limits of theindustry in line with the current oil prices, exchange rate and the volumesbeing handled by each company.