LAHORE: Oil Marketing Association of Pakistan (OMAP) on Tuesday appealed to chairman Oil and Gas Regulatory Authority (OGRA) Masroor Khan to recover the foreign exchange losses of the petroleum importers.
The petroleum importers suffered a huge loss on the actual basis and in this regard, the wrongly given amount to ineligible and non entitled companies should be withdrawn and actual petroleum importers should be compensated.
Chairman OMAP Tariq Wazir Ali wrote a letter to Chairman OGRA Masroor Khan in which he said,” To keep the Oil Industry away from dry outs and maintain strategic reserves, OMAP also strongly request urgent intervention to bring LC lines of the Oil industry corresponding to current oil prices, exchange rate and the volumes being handled by each company.”
He further wrote that OGRA’s practice of staggering foreign exchange losses should immediately be stopped and must be passed on as actual. He said that applying an exchange loss adjustment through pricing also results in undue compensation to those OMCs who have not imported any product while lower compensation for OMCs with a higher proportion of imported products compared with PSO.
“This phenomenon is allowing undue and unrealistic advantages to the OMCs/players who have either no import or reasonably low import or above all procure/sell the local refineries production”, he demanded adding that this wrong practice entails favoritism to the players who deal in selling locally procured/produced Petroleum products but manage to become the beneficiary of a benefit meant to be entitled to importers of petroleum products only.
Chairman OMAP further appealed to Chairman OGRA that this practice must be curbed, the benefit of billions of rupees disbursed to such players should be reimbursed to the affected OMCs & Government exchequer while this practice must be investigated as to why the local product sellers are enjoying the policy benefit entitled for real importers only to ascertain if this policy is being practiced mistakenly or otherwise.
He further explained, “Recovering such wrongly disbursed amounts to such entities / OMCs would bring billions of rupees in Government kitty. To address the matter in true perspective, OMAP recommends introducing a pool system and full compensation of exchange losses up to 60 days as allowed by the ECC to each OMC based on its import profile.”
Talking about the recent Rupee depreciation, Tariq Wazir Ali wrote in the letter, “The rapid depreciation of the Pak. Rupee has caused a loss of billions of Rupees to the Oil Marketing Industry, already facing the worst situation as the Letters of Credits (LCs) are getting settled/retired on the new exchange rates whereas the related product has already been imported earlier and sold. The Oil marketing industry continues to suffer massive losses even after the increase announced w.e.f. 29 January 2023, and remains under severe pressure.”
He said that despite the compensation for foreign exchange losses allowed for LCs up to 60 days using PSO as a benchmark as per ECC approval of 1st April 2020, it is worth mentioning to narrate that the reason for incurring such losses arises out of the fact that PSO is settling/retiring LCs usually within 30-45 days as per our understanding rather than 60 days allowed as mentioned earlier. This anomaly is bound to cause loss to the Government exchequer as well as the Oil Industry since the same is passed on to the public in prices.
Copyright Business Recorder, 2023