Oil sector fears price differential claims to remain unpaid

KARACHI: The center will pay Rs2.28/litre in Price Differential Claim (PDC) to freeze the rate of high speed diesel (HSD); however, oil marketers and refiners are unsure of being paid on time, given the government’s long track record of failing to meet deadlines, The News learnt on Tuesday.

Oil & Gas Regulatory Authority (OGRA) and Petroleum Division (PD) will develop mechanism for the release of amount of PDC.

Under the latest development, the PDC (Rs2.28/litre) on HSD has been adjusted in ex-depot to OMCS by amending its earlier order to pay it to both OMCs and refineries.

According to sector sources, refineries and oil marketing companies (OMCs) are yet to receive the previous PDC payments from the government.

“A total of Rs4 billion was calculated on account of PDC for freezing the price of petroleum products for first four days of month of November last year,” official sources disclosed.

The industry officials said the PDC was introduced in 2008 after oil prices started rising and some of the amount accumulated under this head was unpaid so far.

Non-payment of PDC of month of November has severely hit the cash-flow of the oil sector and if this PDC was not paid, it will adversely impact the business.

As per sources, the government has asked the OMCs to bear the cost for now, which it said would be adjusted later, thereby spending nothing from the national exchequer.

The current PDC of Rs2.28/litre on HSD has been calculated by basing it on current global crude oil price of $100/barrel and if the liquid fossil fuel markets continue to rise, the amount of PDC will multiply accordingly. State Bank of Pakistan (SBP) has asked the banks to consider enhancing the credit limits of OMCs and refineries in view of rising global oil prices.

In a recent meeting with governor SBP, the issue of commercial banks being reluctant to enhance the credit limits for oil sector was also raised by stakeholders.