Accord reached for another Saudi oil facility: Tarin

Published September 30, 2021
This file photo shows Finance Minister Shaukat Tarin speaking in the National Assembly. — Photo courtesy: NA Twitter/File
This file photo shows Finance Minister Shaukat Tarin speaking in the National Assembly. — Photo courtesy: NA Twitter/File

ISLAMABAD: With prices of petroleum products set to increase on Thursday (today), Finance Minister Shaukat Tarin has disclosed that an agreement for another Saudi oil facility on deferred payments has been reached and would be formally announced within two to three days.

“They [Saudi Arabia] are not only considering another oil facility on deferred payments but an agreement has almost been reached that would hopefully be made public in two or three days,” Mr Tarin said on Wednesday while testifying before the National Assembly in response to a question.

During Question Hour, MNA Maulana Abdul Akbar Chitrali raised a supplementary question on a written reply to his question as to why there had been coldness in bilateral relationship with Saudi Arabia after its $1.5 billion assistance for Pakistan Develop­ment Fund in 2013-14.

In response, Mr Tarin said Saudi Arabia had given a big package to Pakistan that included oil supplies on deferred payments and cash. “They provided us $5bn in cash and took it back slowly, slowly. As we speak, Saudi Arabia is considering another oil facility on deferred payments on request to absorb the impact of rising oil prices in the market,” he said and then hastened to add that not only considering but an agreement had been finalised.

Prices of petroleum products in the domestic market are estimated to go up on Thursday by Rs2.60 to Rs5.35 per litre for the next fortnight if calculations of the Oil and Gas Regulatory Authority (Ogra) are accepted by the government without increasing tax rates.

However, a senior official told Dawn that the government might pass on a higher increase in prices to consumers by slightly jacking up tax rates ahead of upcoming negotiations with the International Monetary Fund (IMF).

On the basis of existing tax rates, import parity price and rupee depreciation, the increase in the price of petrol works out at about Rs5.35 per litre and that of high speed diesel at Rs2.60. The increase in prices of other products, kerosene and light diesel oil has been calculated at about Rs2 per litre each.

Moulana Chitrali asked whether Pakistan had received funds from Saudi Arabia under Pakistan Development Fund Limited (PDFL) and, if so, how much over the last 10 years as well as details of their utilisation in the provinces and if something also reached Chitral out of these funds.

In his written reply, Shaukat Tarin confirmed that with the approval of the prime minister, during the financial year 2013-14, an amount of $1.5bn equivalent to Rs157.198bn was received as grant from Saudi Arabian Monetary Agency (SAMA) and transferred to PDFL’s account in the State Bank of Pakistan.

Out of the total amount, Rs114bn was disbursed as cash development loan (CDL) to National Power Parks Management Company Limited (NPPMCL) operating LNG-based power plants in Punjab with the approval of the federal cabinet.

PDFL had acquired these CDLs from NPPMCL as advance against equity injection on June 29, 2017, and Rs32.738bn was again provided to NPPMCL as a long-term loan on January 29, 2020.

The finance minister said no fund out of this grant was utilised in any province and in backward areas, including Chitral district, till date.

It may be recalled that Mr Tarin had on June 12 announced at a post-budget news conference that an understanding had been reached with Saudi Arabia for revival of its oil facility on deferred payments. He said Pakistan and Saudi Arabia had reached an understanding on revival of the oil facility on deferred payments, although the quantum of oil imports and terms of arrangement were yet to be decided.

Saudi Arabia had provided $3bn in cash deposits and promised a $3bn oil facility to Pakistan to help the latter shore up its foreign exchange reserves in 2018. However, the arrangement fell through as bilateral relations deteriorated and Islamabad had to return $2bn out of $3bn deposits.

Later, on June 22, then special assistant to the prime minister on finance and revenue Dr Waqar Masood Khan had once again said at another news conference that Saudi Arabia had announced the availability of $1.5bn oil facility per annum.

A petroleum division official said the price increases for the next fortnight had been worked out because of slightly higher international oil prices and chiefly due to the deteriorated exchange rate over the past 15 days.

Published in Dawn, September 30th, 2021

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