Inventory loss: OMAP says govt decision impacted OMCs in ‘unfavourable manner’

LAHORE: The Oil Marketing Association of Pakistan (OMAP) on Monday expressed its deep concern on the recent decision made by the Government of Pakistan (GoP) and enforced by the Oil and Gas Regulatory Authority (Ogra) which led to an inventory loss of a staggering rupees minus eleven billion for the industry, which is undoubtedly unsustainable and poses a grave threat to the already fragile state of the Oil industry.

In a letter written to the State Minister for Petroleum Musadik Masood Malik Chairman OMAP Tariq Wazir Ali expressed his deep concern regarding the recent decision made by the Government of Pakistan (GoP) and enforced by the Oil and Gas Regulatory Authority (Ogra), which has significantly impacted the Oil Marketing Companies (OMCs) in an unfavorable manner.

This decision, pertaining to the reduction of the price of High Speed Diesel (HSD) for the second fortnight of July 2023, goes against the established formula approved by the GoP via ECC’s decision no ECC-307/34/2020 dated July 28, 2020.

Rather than following the approved formula and absorbing the impact of the price increase by reducing the Petroleum Levy, the price of HSD was unilaterally and unrealistically reduced. This action by Ogra not only deviates from the GoP’s approved mechanism but also contradicts the essence of the aforementioned ECC decision. Furthermore, it is important to note that the other incidentals included in the price were carried over from the second fortnight of June 2023.

This unrealistic decision has led to an inventory loss of staggering rupees minus eleven billion for the industry, which is undoubtedly unsustainable and poses a grave threat to the already fragile state of the Oil industry.

The industry is already facing severe financial constraints due to insufficient margins, increased markup, high global prices, depreciation of the Rupee, and other challenges. If this manipulation in pricing is not rectified through an immediate price revision, the OMCs will be unable to ensure uninterrupted fuel supplies, which will further exacerbate the crisis.

It is disheartening to witness the profound impact of Ogra’s casual and non-serious practices on the Oil Marketing sector, resulting in such substantial losses. The industry’s survival is crucial for the overall well-being of the nation, and it is imperative for the government to address these concerns promptly. The unjust policies and unrealistic decisions of the Ogra not only undermine the industry’s stability but also hinder the country’s economic progress.

The letter also says that in light of the dire consequences and the urgent need for intervention, OMAP urges you to consider the gravity of the situation and take immediate steps to rectify this unfair decision. By revising the pricing through a just and transparent process, the government can demonstrate its commitment to supporting the industry’s sustainability and ensuring a level playing field for all stakeholders. We look to you as a voice of reason and an advocate for fair practices within the regulatory framework. Your swift action in addressing this matter will not only safeguard the interests of the Oil Marketing sector but also contribute to the economic growth and stability of our nation.

Copyright Business Recorder, 2023