Payment of PDC to OMCs, others: government may allocate Rs 16 billion in next budget

Government may allocate around Rs 16 billion to pay price differential claims (PDC) of Oil Marketing Companies (OMCs) on petroleum products and guaranteed shortfall of Pak Arab Refinery Limited (PARCO) in upcoming budget 2010-11.
Sources told Business Recorder that Petroleum Ministry has approached the Ministry of Finance to allocate around Rs 16 billion - Rs 7 billion to cover guaranteed shortfall of PARCO, Rs 4 billion for PDC to OMCs, Rs 3.3 billion PDC on imported petroleum products and Rs 965 million old claims of Pakistan State Oil (PSO).
The highest price of crude oil was recorded in international (Arab Gulf) market in July 2008, which stood at $143.09 per barrel. The domestic sale price was required to be adjusted in line with international price but the government did not pass on the full impact of price hike to the consumers from May 2004 onwards, which resulted in accumulated price differential claims of around Rs 290 billion.
"Government has paid around Rs 286 billion PDC to OMCs so far and Rs 4 billion dues on account of PDC are still to be paid," sources said adding that Petroleum Ministry has now requested Finance Ministry to allocate money in next budget to clear the PDC claims. The subsidy was automatically abolished on October 15, 2008 in line with reduction in global oil prices.
The government had released Rs 66.456 billion on account of PDC on petroleum products to OMCs during last financial year (2008-09). This amount was paid to OMCs on provision of subsidy to consumers of petroleum products in line with global high oil prices. The government released over Rs 40 billion PDC to PSO, Rs 15 billion to Shell and Rs 500 million to small OMCs.
After getting loan under the standby arrangement from International Monetary Fund (IMF) in November 2008, the government has not passed on the full impact of reduced oil prices to consumers to fulfil the commitment with IMF regarding revenue collection. PDL (now Petroleum Levy (PL) is a non-tax receipt, but the government has imposed it to enable it to meet its budget deficit target as agreed with the IMF. The government collected Rs 114 billion on account of PDL in 2008-09 and has targeted Rs 122 billion PL collections during the ongoing financial year 2009-10.