LAHORE: The Oil Marketing Association of Pakistan on Monday demanded of the State Bank of Pakistan to announce some relief for the oil marketing companies in the wake of recent Pakistani Rupee depreciation.
In a letter written to the Governor State Bank of Pakistan, Chairman OMAP Tariq Wazir Ali urged the Bank for making such arrangements to reimburse the industry in case of foreign exchange losses.
As per the letter, there are some relief’s in terms of compensation for losses due to foreign exchange for using the PSO as benchmark but in this situation their members failed to recover the losses because of import profile difference with the PSO.
The OMAP also demanded that the trade finance/LC limit of the oil industry must be increased as per the current oil prices and exchange rates. The banking sector must also be advised by the State Bank of Pakistan to enhance the limits of OMCs.
The letter states that recently the country has observed a massive depreciation of Rupee which has caused loss of billions of rupees to the oil industry which was already suffering. After this sheer depreciation, the Letters of Credits (LCs) will now be settling on new rates irrespective of the fact that product has already been sold on previous rates.
These losses are leaving the industry in worse condition and will affect the ratio of profits. In the wake of this situation, it seems that this year the industry’s losses might exceed than the profits. Therefore, immediate actions should be taken to provide relief to the industry.
It is also observed that in the past 18 months, the banking sector has reduced financing to the oil industry irrespective of the Rupee depreciation which also added its part of creating challenges for the industry. This has also caused shrinking the LC limit to 15 to 20 percent.
The letter pointed out that previously, the OGRA used to put all the burden of Rupee depreciation on the industry instead of passing out to the end user which also caused several losses to the industry. So, the OGRA must pass out all the burden of exchange rates at once in order to benefit the industry from recent Rupee depreciation.
Copyright Business Recorder, 2023
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