Refineries warned on Thursday that a petrol crisis might hit the country by mid-February if the government does not settle letters of credit (LCs) difficulties for imported raw materials and additives required by the domestic refining sector.
A national newspaper reported that the refining business stated in a number of letters that the payment delays for additives and raw materials, which were made worse by the dollar shortage, had severely hampered the manufacture of gasoline.
State Bank of Pakistan (SBP) Governor Jameel Ahmed and Minister of State for Petroleum Musadik Malik received separate letters from local refineries informing them that “the situation will become exceedingly severe mid-February 2023 if remedial actions are not taken immediately.”
Petrol Shortage in Punjab
The issue is being made worse by the challenges in setting up LCs to pay for inputs such as raw materials. Vendor stockpiling in anticipation of the price hike projected in the upcoming fortnightly review has already resulted in petrol shortages in Punjab.
Petroleum products are particularly listed on the SBP’s priority list of required imports for significant industries’ foreign remittances.
However, imports of essential raw materials and additives for which LCs had already been obtained were being held by banks. The creation of LCs for NMA imports with payment due dates in February or March 2023 is still met with resistance from banks.
Refineries warned that any delay or suspension of foreign payments for the aforementioned imports would severely impair refinery operations, particularly the domestic production of gasoline.
Refineries said that oil marketing organizations (OMCs) were already experiencing difficulties importing fuel due to Pakistan’s international cash crisis; as a result, they called for maximum output of indigenous petroleum products including gasoline.
They also pointed out that the refining industry had made substantial contributions to Pakistan’s economic growth in the form of revenues, government levies, and taxes, which led to the processing of crude oil and huge savings in valuable foreign currency through import substitution.
The authorities were urged in the letter to grant the refinery sector’s requests to send payments or form LCs in order to develop its commercial activity.
To read our blog on “Chances of petrol to gain more Rs. 30 in coming days,” click here.
