The government has now decided to put a stop to the Iranian diesel smuggling that has flooded the oil business during a period of spiralling inflation, seizing at least 30% of the market.
The Ministry of Interior, Petroleum Division, and Federal Board of Revenue (FBR) have joined forces to combat unlawful smuggling after official diesel sales fell 40% year on year (YoY), according to the Express Tribune.
“It is therefore requested that appropriate stern action be taken in order to curb the menace of oil smuggling across the Iranian border areas,” the Petroleum Division wrote in the letter, adding that “it is, therefore, requested that appropriate stern action be taken in order to curb the menace of oil smuggling across the Iranian border areas.”
Pak Arab Oil Refinery (PARCO) recently informed the Petroleum Division that due to decreased demand, the company had to lower its oil refining capacity by 75%. Excess furnace oil stocks had already put pressure on refineries’ supplies as power plants shifted to Liquefied Natural Gas (LNG) for electricity generation in recent years.
As the Petroleum Division seeks action, the Interior Ministry has requested a full report on fuel use from the FBR, as well as the initiatives that have already been done. In contrast, the FBR has mandated that all relevant customs departments submit their reports in this regard.
Diesel sales averaged 23,000 to 30,000 tonnes per day from March to June of last year, but have dropped to 12,770 tonnes per day in March 2023. According to the Oil and Gas Regulatory Authority (OGRA), unlawful smuggling has reached 4000 tonnes per day, with a monthly sales cost of 120,000 tonnes.
The entire revenue loss due to the decline in sales is projected to be roughly Rs. 10.2 billion every month.
Furthermore, with oil marketing organisations refusing to lift diesel supplies, refineries are experiencing major operational challenges, operating at 50-70 percent capacity and, in certain cases, shutting down output plants.
