Petroleum dealers have flagged an increase in the smuggling of Iranian fuel into Pakistan, the Pakistan Petroleum Dealers Association (PPDA) told Reuters on Tuesday, adding that 35% of diesel sold in the South Asian country is illegally imported into Iran. came from
The association said that in the past Fuel smuggling was limited to Pakistani province of Balochistan, but now it has spread to the rest of the country.
In April, Pakistan’s energy ministry asked security forces to crack down on fuel smuggling from Iran, according to an official memo seen by Reuters. The memorandum states that there has been a decline in the sale of diesel.More than 40% due to smuggled products”,
Pakistan meets most of its fuel demand from the Middle East, but it is also smuggled through its western border with Iran.
The Minister of State for Petroleum was not immediately available for comment.
The country is facing an acute balance of payments crisis with foreign exchange reserves barely enough to cover a month’s imports. Pakistan is taking several measures, including increasing fuel prices, to unlock $1.1 billion tranche of aid from the International Monetary Fund.
increase in fuel prices
Fuel prices have jumped by Rs 143 ($0.5046), or nearly 100%, in the past 12 months. Inflation is at a record high of 36.4% for April, significantly reducing purchasing power for individuals and companies.
According to the Advisory Council of Oil Companies in Pakistan, the country’s oil product sales fell 46% to 8.8 million barrels in April compared to the previous year. A breakdown shows that diesel sales have declined by 50% year-on-year. This does not include smuggled fuel.
According to a report by S&P Global Commodity Insights, Iranian fuel is about Rs 53 cheaper per liter than the official retail price.
It added, “Private dealers are able to make good profits by selling Iranian diesel 35 rupees ($0.1235)/litre cheaper than local dealers.”
The Energy Ministry said that according to the Oil and Gas Regulatory Authority (OGRA), smuggling of about 4,000 tonnes of fuel per day into Pakistan is causing a total revenue loss of about Rs 10.2 billion per month.
The PPDA said Iranian fuel smuggled into Pakistan is further hurting the industry, which is already struggling with low sales.
“I think they’re [government] allowing the smuggling of Iranian oil That’s because there is a shortage of FX, PPDA president Abdul Sami Khan told Reuters.
“Earlier, fuel smuggling was limited to Balochistan only, but now it has spread everywhere,” Khan said.
“I think they’re [government] Allowing Iranian oil to be smuggled into the country as there is a shortage of FX.
PPDA President Abdul Sami Khan
Refineries are finding it difficult to build up stocks as Iranian fuel is much cheaper than domestic fuel.
The power ministry said there was a risk of supply insecurity for products other than diesel as refineries were operating between 50-70% of capacity.
Earlier this month, Attock Refinery Ltd told the Pakistan Stock Exchange that it would operate at around 25% capacity due to lower sales “due to a number of reasons, including the potential inflow of smuggled product into our supply envelope”.