Following the Rupee depreciation, foreign exchange constraints, and prevalent pricing mechanism, the country’s oil industry has sounded alarms regarding major fuel supply breakdown. State Bank of Pakistan’s Policy rate and the recent economic breakdown is hitting the country’s oil industry hard.
In a letter written to the government, the Oil Companies Advisory Council (OCAC) – an association of more than three dozen major oil marketing companies (OMCs) and refineries has directed government’s attention towards the upcoming major fuel breakdown to the dwindling fuel supply chain.
The governor of the State Bank of Pakistan (SBP) and the chairman of the Oil and Gas Regulatory Authority (OGRA) and OCAC, in communication to ministers for finance and energy, requested to address the matter on urgent basis.
The association reminded that the oil industry had repeatedly been seeking the ministries of energy and finance to establish a translucent structure to recover foreign exchange losses in product pricing.
“We request development and immediate implementation of a holistic mechanism for recovery of industry’s exchange losses through inland freight equalization margin (IFEM) to manage the situation and ensure industry’s survival,” the OCAC informed.
Furthermore, the recent sharp breakdown of Rupee’s value against mighty dollar has further aggravated the situation – has made existing LCs insufficient for the
industry. Consequently, “there is a grave danger that import of crude and refined products may be disrupted” the industry warned.
“The industry is on the brink of collapse, instances of fuel shortages in certain areas earlier this year highlight the fragile condition of the industry” for which only the government intervention on an urgent basis would ensure uninterrupted supplies”, the OCAC concluded.
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