Amid rising subsidy allocations, the Pakistan oil industry is now facing challenges in arranging international finances for import of crude and oil products.
Informed sources told Dawn news that the Petroleum Division had informed the Prime Minister and Finance Minister that arrangements of oil imports were getting tough by the day as foreign banks were not providing financing against Letters of Credit (LCs) opened by oil marketing companies (OMCs) and refineries with the local banks.
A senior official told Dawn that except two large corporations, Pakistan State Oil (PSO) and Pak-Arab Refinery Limited (Parco), all OMCs and refineries were struggling to arrange import of petroleum products and crude.
The sources said about six-seven cargos worth $50-75 million each ($350-500 million cumulative) depending on size and product were held up at present because of the increased risk following some critical statements from the relevant ministries about the tough fiscal and foreign exchange position.
They said Pakistani banks were opening LCs on behalf of the oil industry, but their partner banks were not extending credit cover, Dawn reported.
“Unfortunately, the country’s fuel supply is now also being severely threatened by limited credit facilities, high inflation and increasing rupee-dollar parity,” stated an oil industry’s report sent by the Petroleum Division to the Prime Minister Office and the Finance Minister.
The oil industry has told the government that this financial predicament had left the oil industry extremely vulnerable and fragile, adding that this “may result in breakdown of the supply chain”.