ECC approves grant of Rs55.48bn for disbursement of PDC

Federal cabinet’s economic coordination committee (ECC) on Monday approved a supplementary grant of Rs55.48 billion for disbursement of Price Differential Claims (PDC) to Oil Marketing Companies (OMCs), refineries for the first fortnight of May, 2022. 

As per details, the ECC made this approval on Monday under Federal Minister for Finance and Revenue Miftah Ismail wherein Federal Minister for Industries and Production Makhdoom Syed Murtaza Mehmood, Minister of State for Finance & Revenue Aisha Ghous Pasha, Minister of State for Petroleum Musadik Masood Malik, Federal Secretaries and senior officers were in attendance.

 During the course of the ECC meeting, the Petroleum Division submitted a summary for reimbursement of Price Differential Claims (PDCs) of Oil Marketing Companies (OMCs) and refineries. The price differential is to be paid to the Oil Marketing Companies, refineries by the Government as a subsidy in the wake of Government’s decision to keep the petroleum products’ prices fixed at the level notified on 1st March, 2022.

 The ECC after deliberation approved a supplementary grant of Rs55.48 billion for disbursement of PDC to OMCs/Refineries for the first fortnight of May, 2022. Due to the continuously rising trend of oil prices in the international market, the quantum of subsidy has been on a higher side, said the Finance Division.

Oil prices have been increasing in the international market since September 20222 resulting in substantial increase in the consumer price of petroleum products in the country. And, former Prime Minister Imran Khan announced a relief package on 28th February 2022. The package included a reduction in the consumer price of Motor Spirit (MS) and High Speed Diesel (HSD) by Rs10 per litre effective from 1st March 2022 and commitment to keep the prices stable till the end of the current fiscal year.

 In order to implement the announcement the prices of petroleum products have been anticipated at the level notified on 1st March 2022. Due to this fixation, the rate of petroleum levy and sales tax on MS and HSD has been brought down to zero percent. This has generated PDC of OMC/refineries which is being paid to them by the government as subsidy.

According to sources in Oil Companies Advisory Council (OCAC), the ECC approved Rs52 billion for 1-15 May while Rs9 billion will be approved day after tomorrow which is the shortfall of April 2022. They said OMCs and refineries are short by Rs 16-17 billion for balance of April and 1-15 May. They said the government is neither abolishing PDC nor paying 100 percent PDC to the oil sector. We have requested the government that the PDC recovery cycle needs to be shortened from the fortnight to weekly basis as this step will help in easing out the substantial cash flow and working capital constraints of the country, said OCAC sources

Raising serious concerns regarding PDC on fuel prices, OCAC, in a letter to the Secretary Petroleum Division dated May 9, 2022, has asked for the reimbursement of billion rupees worth Price Differential Claims (PDC) of OMCs and refineries.

According to the OCAC, the current PDC on diesel stands at PKR 73 per litre and on petrol it is Rs30 per litre which represents a 109percent and 26pc respective increase, versus the PDC rates in the 2nd fortnight of March 2022.

“This exorbitant increase has severely impacted the oil marketing and refining sector’s cash flows and its ability to meet critical financial/working capital obligations,” said OCAC.

Despite various assurances, the government has not removed the subsidy on prices of petroleum products and at the current rates, the fortnightly impact for the industry is expected to exceed Rs57 billion during the current fortnight. Additionally, based on the current international prices, the PDC is expected to further increase in the coming fortnight, said OCAC letter.

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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]

1 COMMENT

  1. “Oil prices have been increasing in the international market since September 20222 resulting in substantial increase in the consumer price of petroleum products in the country. And, former Prime Minister Imran Khan announced a relief package on 28th February 2022. The package included a reduction in the consumer price of Motor Spirit (MS) and High Speed Diesel (HSD) by Rs10 per litre effective from 1st March 2022 and commitment to keep the prices stable till the end of the current fiscal year.”

    There’s an error in the first sentence.

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