The government has finally decided to curb the Iranian diesel smuggling that has glutted the oil industry in a time of skyrocketing inflation, capturing at least 30 percent of the market.
The Ministry of Interior, Petroleum Division and Federal Board of Revenue (FBR) have banded together to take effective actions against illegal smuggling as official diesel sales have declined 40 percent on a year-on-year (YoY) basis, Express Tribune reported.
“Anti-smuggling enforcement falls in the domain of Ministry of Interior/ law enforcement agencies besides the FBR/ Customs authorities and the provincial government of Balochistan,” the Petroleum Division wrote in the letter, adding that “it is, therefore, requested that appropriate stern action may be taken in order to curb the menace of oil smuggling across the Iranian border areas”.
Recently, Pak Arab Oil Refinery (PARCO) wrote to Petroleum Division informing that the company had to reduce its oil refining capacity to 75 percent amid the reduced demand. Refineries’ stocks had already been under pressure with excess furnace oil stocks as power plants moved towards Liquefied Natural Gas (LNG) in recent years for power generation.
As Petroleum Division is seeking action, the Interior Ministry has sought a complete report on fuel consumption from FBR and the actions already being taken. FBR on the other hand has directed all relevant customs departments to submit their reports in this regard.
Average diesel sales from March to June last year stood at 23,000 to 30,000 tons per day which have come down to 12,770 tons per day in March 2023. According to Oil and Gas Regulatory Authority (OGRA), illegal smuggling has reached 4000 tons per day which is costing 120,000 tons per month in sales.
Due to the drop in sales, the total revenue loss is estimated to be around Rs. 10.2 billion per month.
Additionally, with oil marketing companies refusing to lift the diesel stocks, refineries are facing severe operational problems, running at 50-70 percent capacity and even shutting down production plants in some cases.
