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Petrol crisis to hit Pakistan by mid-Feb, refineries warn

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  • Delay in payments of raw materials hamper petrol production.
  • Situation to become critical if remedial measures not taken immediately.
  • Punjab already experiencing unavailability of petrol.

KARACHI: The refineries warned of a looming petrol crisis by mid-February if the government fails to resolve the payments issues of imported raw materials and additives needed by the sector, The News reported Friday. 

The delay in payments of raw materials and additives as well as the dollar shortage hampered the production of petrol massively, the refineries explained. 

“The situation will become extremely critical mid-February 2023, if remedial measures are not taken immediately,” local refineries warned State Minister for Petroleum Dr Musadik Malik and Governor State Bank of Pakistan (SBP) Dr Jameel Ahmed in separate letters. The letters were jointly written by Pakistan Refinery Limited, National Refinery, Attock Refinery and Cnergyico Refinery.

Difficulties in establishing letters of credit (LCs) for the payment of raw materials and other inputs needed by the refineries have been cited as the major cause of the looming crisis. Punjab has already started experiencing the unavailability of petrol, after alleged hoarding in anticipation of the price hike expected in the next fortnightly review.

The copy of the letter available with The News says that the SBP issued a priority list of essential imports for foreign remittances of critical industries and petroleum products were included in that priority list.

However, imports of essential raw materials and additives mainly N-Methylaniline (NMA — a non-metallic RON booster) against which LCs have already been established were being held by the banks for release of documents and payments. Moreover, the banks are reluctant to establish LCs for NMA imports against which payment for month of February/March 2023 are falling, it stated.

Refineries cautioned that the delay or suspension of foreign payments for imports of such essential raw material/additives including establishing credit letters for the same would seriously hamper the operations of refineries, especially the local production of mogas (petrol).

Refineries noted that maximum production of indigenous petroleum products especially mogas at this critical time was the need of the hour, as oil marketing companies (OMCs) were already finding it difficult to import the fuel due to the foreign exchange liquidity crunch.

They added that the refining sector has been contributing enormously towards the economic development of Pakistan in the shape of revenues/government levies/taxes and more importantly processing of crude oil and substantial savings in precious foreign exchange through import substitution.

The letter said that the sector with such major contributions to foreign exchange savings should not be denied permission to remit a payment/establish credit letters to further its business operations.

Refineries asked the central bank to advise banks to release/establish credit letters for refineries, and remittances against already issued letters without further delay to avoid any unpleasant situation.

PPDA urges probe into shortage

Keeping in view the shortages that have been surfacing in different parts of the country, Pakistan Petroleum Dealers Association (PPDA) has asked the Ministry of Petroleum and Natural Resources to immediately formulate a committee to find out the reasons behind this shortage. 

The committee should consist of different stakeholders comprising the Oil and Gas Regulatory Authority (OGRA), media teams and district administrations. These combined teams should raid different oil depots, and pumps to find out the reasons behind the current shortage, especially in Punjab.

The association leaders on Thursday held a discussion programme with the Lahore Economic Journalists Association. The office bearers of PPDA said that drafts of around Rs1 billion have been stuck with oil companies, and these 12,000 dealers were not getting supplies from the OMCs.

They said that normally a petrol pump can reserve 30,000 to 50,000 litres of petroleum products and as per OGRA’s instructions, pump owners must keep these reserves for three days. On the other hand, oil depots have much more capacity to reserve oil stocks. The committee should inspect such depots and act according to the law if their involvement in stocking petroleum products is proven, they urged.

The association said that in Lahore, the daily demand for oil products was 4 million litres, whereas currently only a supply of 1.3 million litres was being providedThe pumps have been facing this low supply issue for one month.

“The companies shelve the supply to nearly half twice a month as cartelization has increased in the past six years,” they alleged. The PPDA also termed the recent statement of State Minister for Petroleum Musadaq Malik as “non-serious”, saying such an irresponsible statement could lead to further chaos.

PPDA said that the OMCs were deliberately creating a shortage, and were holding on to hundreds of thousands of liters of oil stocks, which would be released once the government increases prices.

Business

Over 600 points are added by PSX in intraday trading.

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Tuesday’s lunchtime trading on the Pakistan Stock Exchange saw favorable activity.

During intraday trading, the benchmark KSE-100 Index increased by 672.08 points, or 1.11%, and was trading at 61131.82 levels.

The KSE-30 Index was trading at 20,558.31 after adding 211.46 points, or 1.04%.

The Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Peoples’ Party (PPP) had another round of discussions for the establishment of a central government the day before the rally in the local stock exchange.

In the meanwhile, Fitch Ratings has issued a warning, stating that the likelihood of default would rise in the event of a drawn-out discussion or the inability to reach an agreement with the International Monetary Fund (IMF).

According to the State Bank of Pakistan, which reported net foreign reserves of $8 billion as of February 9, 2024, up from a low of $2.9 billion on February 3, 2023, Pakistan’s external situation has improved recently.

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The smartphone app “Tajir Dost” to tax Pakistani businesses is anticipated to launch on February 22.

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The sources stated that the caretaker administration aims to include 3.5 million shops in the tax net by use of the “Tajir Dost” app.

They said that Anwaar-ul-Haq Kakar, the acting prime minister, has instructed the relevant authorities to conclude their engagement with the retailing bodies within a few days.

The introduction of the “Tajir Dost” smartphone app to impose taxes on several merchants was authorized earlier this month by the acting federal administration.

The smartphone application, created by Pakistan Revenue Authority Limited (PRAL), a division of the Federal Board of Revenue (FBR), is intended to serve as a registration tool for shops and dealers throughout the nation.

The app’s database will be updated with the traders’ information who have already registered with the FBR.

Previously, in December 2023, the Federal Board of Revenue (FBR) made history by collecting Rs1.021 trillion. After deducting refunds of Rs 38 billion that were given out that month, the FBR’s net collection increased to Rs 984 billion.

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SBP confirms the choice to use new currency notes was not influenced by the IMF.

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In response to recent rumours, Saleem Ullah, the deputy governor of the State Bank of Pakistan (SBP), said on Thursday that the International Monetary Fund (IMF) had no influence over the decision to release new currency notes.

Saleem Ullah underlined in an interview that printing new notes is a regular procedure carried out every 15 to 20 years to maintain the currency’s integrity.

He stressed that, in contrast to rumours, the deficit is expected to decline in the next fiscal year, in line with the goals of the new monetary policy.

“Every 15 to 20 years, new notes are printed,” he clarified. The new currency’s goal is to keep the note’s integrity intact.”

The SBP assured the public earlier this week that the current banknote series will continue to be in circulation despite the introduction of new currency notes, which it intended to implement over the course of the next two years.

Regarding the latest series of currency notes, the deputy governor clarified that they were launched in 2005 and were in circulation for three years.

He admitted that the procedure was time-consuming and estimated that because of the careful preparation required, it would take around two years to issue the first note.

In addition, he guaranteed that the new banknotes will have improved security measures because they would be made using contemporary technology. He gave information regarding the SBP’s effort to get public feedback on the new currency notes’ design, highlighting the fact that recommendations were being actively sought from the populace.

“There are three prizes for each denomination, and there are a total of seven denominations, hence 21 prizes,” he disclosed, highlighting the process’ openness. First place is worth Rs 1 million, second place is worth Rs 500,000, and third place is worth Rs 300,000.

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