Smuggled Iranian diesel is causing a staggering revenue loss of Rs. 10.2 billion per month to Pakistan’s economy.
Failure to enforce laws and regulations by authorities has done a lot of damage to the economy, with smuggled Iranian diesel accounting for roughly 40 percent of domestic diesel consumption, reported Business Recorder.
The Oil Gas Regulatory Authority (OGRA) has confirmed a significant decrease in official sales. While average consumption remained between 23,000-30,000 tons per day in March-June, average sales since February 2023 have dropped to 15,000 tons per day. The downward trend has continued to date.
According to OGRA, diesel sales had dropped by more than 40 percent compared to last year due to the influx of products from other countries. Due to the enormous price difference, smuggling has had a significant impact on the formal oil business of the country, particularly Balochistan.
Cross-border smuggling volumes are roughly 4,000 tons per day, resulting in monthly sales losses of approximately 120,000 tons or 143 million litters per month, yielding a revenue loss of Rs. 10.2 billion per month.
The massive drop in product upliftment from oil refineries is forcing them to reduce production capacity, resulting in supply insecurity for products other than diesel. OGRA says local oil refineries are currently operating at 50-70 percent capacity.
The oil industry currently has diesel stocks of around 675,000 tons, which covers national demand for around 44 days.
The main reason behind the availability of smuggled diesel in Pakistan is the price differential between Iranian and domestically produced diesel. Iran heavily subsidizes domestic fuel prices, making it cheaper for Iranian fuel sellers to smuggle diesel into Pakistan and sell it at cheaper rates than domestically produced diesel.
Furthermore, Pakistan has a complex tax structure that makes domestic diesel more expensive than smuggled Iranian diesel. Despite efforts to curb the issue, the widespread availability of Iranian smuggled diesel is likely to persist until the government takes improved steps and enforces strict border control procedures to nullify diesel altogether.
