ISLAMABAD: The State Bank of Pakistan (SBP) has eased rules allowing banks to increase credit limits of some struggling Petroleum Marketing Companies (OMC) to ensure smooth importation and availability of petroleum products in the country, The News has learned.
Local lenders have remained accommodating to oil sector credit needs and are willing to support WTO requirements subject to positive credit due diligence, according to a letter written by SBP written by the Petroleum Regulatory Authority and gas (OGRA).
The letter dated April 1, 2022 indicates that in view of the strategic importance of the availability of petroleum products to meet domestic needs, the central bank has actively engaged with relevant stakeholders for the resolution of the matter and to To this end, various meetings have been organised. attended by representatives of banks, WTOs and oil refineries.
SBP monitors, in accordance with the letter, import transactions and OMC credit risks to ensure that banks meet the credit needs of the sector in a timely manner.
The central bank has also requested OGRA, in the event of any shortfall in the planned oil import target of any WTO, to share the same with it so that joint efforts can be made to resolve the issues. about.
Local refineries have long complained to the government that their working capital situation has been drastically reduced given the limited line of credit, the massive increase in the price of petroleum products on the international market and the sharp depreciation of the rupee against the dollar.
Refineries have requested an increase in their credit limits required to open LCs (letters of credit) for the timely importation of crude oil for the production of finished products such as mogas (motor gasoline or gasoline), diesel and fuel oil.
Additional Secretary of Petroleum Division in a letter dated February 28, 2022 addressed to the Governor of State Bank of Pakistan had mentioned that commercial banks were showing indifference to the demands of the industry which was in desperate need of an increase in the credit limit.
Commercial banks were previously reluctant to raise credit limits for OMCs and refineries due to an FIA investigation into Hascol after it defaulted on Rs 54 billion.
But the FIA had allowed all commercial banks to do business with scrupulous OMCs seeking an increase in their credit limits mainly due to the massive depreciation of the rupee against the dollar and the high international fuel market.
However, in a recent meeting, held on March 31, 2022 to call on refineries to increase their throughput, it was decided that the petroleum division and OGRA would approach the central bank to help resolve credit limit issues preventing the oil sector to open LCs for crude oil imports.
The Oil Division would raise the issue with the CEO (PC) and the respective Oil Exploration and Production Companies (OGDC/MOL/PPL) for increased local crude supply to ARL (Attock Refinery Limited).
In addition, it was also agreed that Cnergyico PK will sue banks to increase credit limits for opening LC for crude oil imports.
During the meeting, the government assured the stakeholders of its best possible support. The meeting also reached consensus that, given the current harvest season and product availability issues in the international market, all refineries would ensure maximum capacity utilization.
Another decision, taken at the meeting, was that all refineries would strive to increase heating oil production given the current LNG supply challenges and increased demand from the electricity sector. .
The Petroleum Division has been given the responsibility to process the approval required for the notification of locally produced HSD/PMG specification, which can facilitate refineries to scale up production.