Refineries in Pakistan are warning of a severe petrol crisis by mid-February, unless the government takes immediate action to resolve the issues surrounding letters of credit (LCs) for imported raw materials and additives. In separate letters addressed to the Minister of State for Petroleum and the Governor of the State Bank of Pakistan, the refining sector expressed their concern that the delay in payments, combined with the dollar shortage, is severely hindering petrol production.
The challenges in obtaining LCs to pay for essential inputs have been identified as a major contributor to the crisis. Vendors have started hoarding supplies in anticipation of a price hike, leading to petrol shortages in Punjab. Despite petroleum products being on the State Bank of Pakistan’s priority list of essential imports, imports of raw materials and additives are being held by banks, who remain hesitant to establish LCs for future payments due in February and March 2023.
Refineries have stressed the importance of maximum production of domestic petroleum products, as oil marketing companies are already facing difficulties importing fuel due to a lack of foreign exchange liquidity in Pakistan. The refining sector also pointed out their significant contributions to the country’s economy, including revenue, government levies, and taxes, as well as their role in processing crude oil and saving precious foreign exchange through import substitution.
Any delay or suspension of foreign payments for the imports in question would severely impact refinery operations and local petrol production, the refineries warned. The situation is rapidly becoming critical and immediate action is needed to avoid a nationwide petrol crisis.
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