ISLAMABAD: The single-point maiden meeting of the Economic Coordination Committee (ECC) of the newly formed federal cabinet on Tuesday approved Rs69 billion for immediate reimbursement of price differential claims (PDCs) to the oil industry on account of cheaper sales of petroleum products than the cost of purchase.
The meeting of the ECC was presided over by Federal Minister for Finance & Revenue Miftah Ismail and attended by another Federal Minister for National Food Security and Research Makhdoom Syed Murtaza Mehmood, federal secretaries and senior officers. The ECC “approved a supplementary grant of Rs68.74bn for disbursement of PDC to oil marketing companies (OMCs) and refineries for the month of April and to meet the shortfall for the month of March,” an official announcement said.
The decision is expected to be immediately ratified by the federal cabinet on Wednesday so that funds could be disbursed to OMCs and refineries at the earliest to avoid supply chain disruptions. The ECC after discussion approved a supplementary grant of Rs68.74bn for the disbursement of PDC to OMCs and refineries for the month of April and to meet the shortfall for the month of March.
The price differential is to be paid to the OMCs and refineries by the government as a subsidy in the wake of the government’s decision to keep the petroleum products’ prices stable. Due to the continuously rising trend of oil prices in the international market, the quantum of subsidy for the month of April has been significantly higher than in March 2022.
The statement said the previous government did not consider the PDCs for the first fortnight of April 2022, therefore, the new government had to bear the burden of a higher quantum of subsidy as PDCs of the OMCs.
The meeting was informed that international oil prices had been rising since September 2020 and the previous government had a substantial increase in domestic consumer prices. However, the former prime minister on February 28 announced a relief package that included a reduction in the consumer price of petrol and diesel by Rs10 per litre with the commitment to keep the prices frozen till the end of the fiscal year.
As a consequence, the product prices that were estimated to go up on March 1 had to be reduced. As a result, the petroleum levy and general sales tax on petrol and diesel were reduced to zero. On top of that, PDCs of OMCs and refineries were estimated at Rs32bn for the month of March including previous outstanding PDC of November 1 -4, 2021. The ECC and federal cabinet of the previous government approved Rs31.73bn for reimbursement of PDCs to OMCs and refineries.
The meeting was also told that international prices kept on increasing and hence additional PDC requirement was estimated at Rs32bn for the first fortnight of April for which the previous government kept the prices frozen without PDC approval. On top of that, another Rs35bn PDC is now estimated for the second fortnight of April (16-30) for which the new government kept the prices unchanged. The meeting was also informed that some Rs2bn shortfall had also emerged for the previous month, thus the total requirement of Rs69bn.
Special anticipatory approval was secured from Prime Minister Shehbaz Sharif, who also happens so far to be the minister in-charge of the energy ministry, for additional funds required for April’s PDC to avoid product shortages given the fact these funds are not budgeted. The cabinet meeting due on Wednesday (today) would clear formal reimbursements at the outset.