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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.

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In a first for history, PSX crosses the 77,000 milestone.

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At 77,213.31, the benchmark KSE-100 hit an all-time high, up 1,005.15, or 1.32%, from the previous close of 76,208.16.

The government’s readiness to seal an agreement with the International Monetary Fund (IMF) following the budget was cited by analysts as the reason for the upward trend.

Experts anticipate that in an attempt to bolster its position for a fresh bailout agreement with the International Monetary Fund (IMF), the budget for the fiscal year ending in June 2025 would set aggressive fiscal goals.

Budget for Pakistan, 2024–2025
Pakistan’s budget for the fiscal year 2024–25, with a total expenditure of Rs18.877 trillion, was presented on Wednesday by Minister of Finance and Revenue Muhammad Aurangzeb.

The Finance Minister, Muhammad Aurangzeb, outlined the budget highlights. He stated that the GDP growth target for the fiscal year 2024–25 is set at 3.6 percent, while the inflation rate is anticipated to stay at 12 percent.

He stated that while the primary surplus is anticipated to be 1.0 percent of GDP during the review period, the budget deficit to GDP is forecast to be 6.9 percent over the period under review.

According to the minister, tax income collection increased by 38% in the current fiscal year, and the province will receive Rs7,438 billion. The Federal Board of income expects to earn Rs12,970 billion in revenue for the upcoming fiscal year.

In contrast to the federal government’s projected net income of Rs9,119 billion, he stated that the federation’s non-tax revenue projections are set at Rs3,587 billion.

The federal government’s total outlays are projected to be Rs18,877 billion, with interest payments accounting for the remaining Rs9,775 billion.

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Pakistan currently has $14.38 billion in foreign exchange reserves.

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Pakistan’s commercial banks’ reserves, which stood at $5.28 billion at the conclusion of the week ending on June 7, rose by US$174 million, according to a central bank statement.

Reserving US$6.2 million less, the SBP now has US$9.10 billion in reserves. The causes for the decline in the reserves it had were not disclosed by the central bank.

The SBP released a statement that stated, “SBP reserves decreased by US$ 6 million to US$ 9,103.3 million during the week ended on 07-June-2024.”

The State Bank of Pakistan’s (SBP) foreign exchange reserves were reduced by US$ 63 million as a result of repaying external debt, with the reserves standing at US$ 9.093 billion as of earlier on June 6.

The central bank spokesperson said in a statement that as of the week that concluded on May 31, the nation’s total liquid foreign reserves were $14.31 billion.

In terms of net foreign reserves, commercial banks have US$ 5.22 billion of the overall foreign reserves, according to the SBP.

SBP reserves dropped by US$ 63 million to US$ 9,093.7 million during the week that ended on May 24, 2024, according to the announcement.

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In the local market, the price of gold plummets to Rs240,700/tola.

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Gold with a 24-karat purity level has dropped by Rs1200/tola on the local market.

Each tola of 24-karat gold is now selling for Rs240,700, with a further drop of Rs1029 bringing the price of 10 kilos of gold to Rs206,361. These figures are courtesy of the All Sarafa and Jewelers Association.

Meanwhile, after a $2 decline on the global market, one ounce of gold will be valued $2315.

A tola of gold was worth Rs 600 more on Wednesday.

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