If the government does not handle the payment concerns of imported raw materials and additives needed by the industry, the refineries have warned of an impending petrol crisis by mid-February.
The manufacture of petrol was severely hampered, according to the refineries, by the late payments for raw materials and additives as well as the dollar scarcity.
State Minister for Petroleum Dr. Musadik Malik and Governor State Bank of Pakistan (SBP) Dr. Jameel Ahmed received separate letters from local refineries warning that “the situation will become exceedingly severe mid-February 2023 if remedial actions are not done quickly.” Pakistan Refinery Limited, National Refinery, Attock Refinery, and Cnergyico Refinery all contributed to the writing of the letters.
The main factor contributing to the impending crisis has been identified as difficulties in establishing letters of credit (LCs) for the payment of raw materials and other inputs required by the refineries. After claiming hoarding in anticipation of the price increase anticipated in the following fortnightly review, Punjab has already started experiencing a shortage of petrol.
The banks were holding back imports of necessary raw materials and additives, primarily N-Methylaniline (NMA), a non-metallic RON booster, against which LCs had previously been formed. Additionally, it indicated that banks are unwilling to create LCs for NMA imports against which payments for the months of February and March 2023 are due.
Refineries issued a warning that the suspension or delay of international payments for the imports of such necessary raw materials and additives, including the establishment of credit letters for the same, would substantially affect refineries’ operations, particularly the local manufacturing of mogas.
Refineries highlighted that at this crucial time, it was imperative to produce as many domestically produced petroleum products as possible, particularly mogas, as oil marketing companies (OMCs) were already finding it challenging to import the fuel due to the lack of foreign exchange liquidity.
They continued by saying that the refining industry had made a significant contribution to Pakistan’s economic growth in the form of government levies, taxes, and revenue, but more importantly, through the processing of crude oil and significant savings on valuable foreign currency through import substitution.
The letter said that the sector with such major contributions to foreign exchange savings should not be denied permission to remit a payment/establish credit letters to further its business operations. Refineries asked the central bank to advise banks to release/establish credit letters for refineries, and remittances against already issued letters without further delay to avoid any unpleasant situation.
