In a letter to the State Bank of Pakistan, the Oil Marketing Association of Pakistan (OMAP) outlined the difficulties the industry is having in light of the current financial crisis, including a scarcity of dollars and a slowdown in the opening of LCs.
The Letter stated:
The OMC firm, which was already struggling for survival, has been rendered inoperable as a result of the current economic climate, LC opening issues, non-adjustment of foreign exchange losses on an actual basis, and highly high cost of doing business. The price caps on motor fuels already place restrictions on OMCs.
The OMCs complained in the letter that the government had violated the terms of its own permitted price adjustment mechanism. The product review conference chaired by the Oil and Gas Regulatory Authority determined that these improper alterations would cause the expected sales volumes for the second week of February to incur losses in the billions of rupees (OGRA).
The letter continued by stating that the industry will not be able to meet the increased demand if the present constricting prices are maintained. The agriculture season is anticipated to start in the second week of March 2023.
The OMAP emphasised that the oil industry, which is already facing many difficulties, will suffer as a result of the ongoing suppression of oil prices over the past year.
It is also important to note that the pricing of HSD does not yet completely reflect the adjusted margin of Rs. 6 per litre. The new OMCs’ margin on motor fuels, which ECC authorised in October 2022 after great anticipation, is still not acknowledged as of this writing. It is Rs. 1 per litre.
The difference in the exchange rate and inflation rate between October 31, 2022, and February 18, 2023, must also be taken into consideration. The OMC margin should be more than Rs. 9 per litre when this important element is taken into account.