The oil industry has warned the government of supply chain disruption and increase in oil sector’s circular debt if it maintained product rates despite rising international prices.
“Based on the critical condition of the industry and increasing trend in POL prices, we urge you to ensure that no further petroleum differential claim (PDC) is imposed on the industry as it will have an unmanageable impact on the cash flows of the industry and may also lead to catastrophic disruption in the POL supply chain,” said the Oil Companies Advisory Council (OCAC) — an umbrella organisation of more than two dozen oil refineries and marketing companies.
In fortnightly oil price review due on January 31, the prime minister rejected a proposal of the ministry of energy to increase petrol and HSD prices by Rs11 and Rs14 per liter to pass on the impact of international prices to consumers. In doing so, the government abolished general sales tax on key petroleum products, including petrol, high speed diesel (HSD), kerosene and light diesel oil (LDO) and reduced petroleum levy (PL) by Rs4.90 per liter on petrol and Rs4.13 per liter on HSD.
At present, there is not GST on all these products while PL stands at Rs13.92per liter on petrol and Rs9.30 per liter on HSD. The PL on kerosene and LDO now stands at Re1 and Rs5.5 per litre, respectively. This is despite the fact that the government had given a commitment to the International Monetary Fund (IMF) to increase PL on petrol and diesel by Rs4 per liter every month until it reached a maximum permissible limit of Rs30 per litre.