KARACHI: Iranian smuggled diesel has replaced 40pc of Pakistan’s domestic diesel consumption, causing an unprecedented revenue loss of Rs. 10.2 billion per month to the country’s struggling economy.
Corruption and lack of enforcement of laws and regulations by authorities, especially the Federal Board of Revenue (FBR), has caused unprecedented damage to the already depressed national economy, as the smuggled Iranian diesel has snatched about 40 percent share of domestic diesel consumption.
Oil Gas Regulatory Authority (Ogra) has verified a significant drop in legal sales by approved Oil Marketing Companies (OMCs). Last year, average consumption during March-June remained in the range of 23000-30000 tons per day.
Huge quantity of electronic goods, Iranian diesel seized
However, the average diesel sales from mid-February 2023 started to decline to 15000 tons per day. Since then, the declining trend has continued, raising serious questions about the performance of the concerned authorities, especially FBR.
The regulatory authority further informed that diesel sales had declined more than 40% compared to last year due to the ingress of products across borders. Smuggling has dramatically affected the formal oil business in Balochistan and other parts of the country due to the enormous price gap.
Furthermore, Ogra stated that cross-border smuggling volumes are approximately 4000 tons per day, which ultimately result in sales loss of about 120,000 tons per month or 143 million litters per month, causing unprecedented revenue loss of Rs 10.2 billion per month to the already shrunk national kitty on account of petroleum levy and customs duty, etc.
In addition, a significant drop in product upliftment from oil refineries is compelling them to reduce their production capacity, leading to supply insecurity for products other than diesel. Furthermore, Ogra said that local oil refineries are presently operating at 50-70 % of the capacity.
Consequently, the oil industry is currently carrying diesel stocks of around 675,000 tons with coverage of about 44 days’ demand.
The sources explained the factors contributing to the prevalence of Iranian smuggled diesel in Pakistan, saying that the price differential between Iranian and domestically produced diesel is one of the significant factors. Iran heavily subsidizes its domestic fuel prices, which makes it cheaper for Iranian fuel sellers to smuggle diesel into Pakistan and sell it at a lower price than domestically produced diesel.
Additionally, Pakistan has a high and complex tax structure, making the domestic diesel more expensive than smuggled Iranian diesel.
Furthermore, they said that the porous border between Iran and Pakistan and the lack of effective border control measures have made it easier for smugglers to bring Iranian diesel into Pakistan.
The two countries share an over 900-kilometer border, which is difficult to patrol due to the rugged terrain, making it easier for smugglers to transport fuel across the border, sources said.
In reply to a question, sources said that corruption and lack of enforcement of laws and regulations by authorities have allowed the smuggling of Iranian diesel to thrive in Pakistan.
Moreover, they said that Pakistan’s fuel market is highly regulated, but corrupt official of customs and other departments have turned a blind eye to the smuggling of Iranian diesel.
Sources said there are also reports about a strong nexus of smugglers, local politicians, corrupt customs officials, and other government functionaries, facilitating this illegal trade further.
The prevalence of Iranian smuggled diesel is likely to continue until the government takes steps to address these factors and ensure strict border control measures, they added.
Copyright Business Recorder, 2023
Comments
Comments are closed.