The Oil Companies Advisory Council (OCAC) has unveiled alarming figures, revealing that smuggled petroleum products are inflicting a staggering loss of $35.6 million on Pakistan’s economy every month.
In a letter addressed to the Secretary of Petroleum, OCAC Chairman Adil Khattak underscored the dire repercussions of this illicit trade on the oil industry, posing a grave threat to government revenue streams. The influx of approximately 4,000 metric tons of smuggled fuel daily, confirmed by the Oil and Gas Regulatory Authority (Ogra), has triggered a national crisis demanding urgent action.
The sales trajectory of Motor Spirit (MS) and High-Speed Diesel (HSD) during the fiscal year 2022-23 mirrors the downturn witnessed amidst the COVID-19 pandemic in FY 2019-20. Despite factors like a decline in GDP growth rate from 6.11% in FY 22 to 0.29% in FY 23, the Year To Date sales of MS and HSD have further plummeted by approximately 6.5% (July-February FY 23-24 vs. FY 22-23), casting doubt on the projected GDP growth rate of +1.7% for FY 24. Moreover, the Monthly To Date sales figures for March 2024 exhibit alarming variances of -12% and -21% respectively, raising concerns over product glut, reduced refinery throughput, and restrained sales volumes.
OCAC emphasized that the illicit trade has disrupted the entire petroleum products supply chain, adversely impacting refinery health, White Oil Pipeline operations, and the profitability of Oil Marketing Companies (OMCs). The significant price disparity between legitimate and smuggled fuel, coupled with weak border controls, is causing irreparable damage to legitimate businesses. Increased imports necessitated by hindrances to local Petroleum, Oil, and Lubricants (POL) production incur substantial financing costs for OMCs, operating on narrow margins.
Furthermore, the government is witnessing revenue losses from Petroleum Levy, Customs Duty, Corporate Tax, Super Tax, among others, as the oil industry loses ground to illicit trade. Petroleum Dealers at retail outlets have also raised concerns about the surge in fuel smuggling, citing sales and revenue losses.
The proliferation of substandard smuggled petroleum products not only drains government revenue but also fuels a shadow economy, complicating efforts to monitor and regulate illicit activities. The environmental, vehicular, and safety hazards posed by substandard smuggled products demand immediate attention.
OCAC has presented a series of recommendations for swift implementation, including robust enforcement measures at borders, regular nationwide crackdowns in collaboration with federal and provincial authorities, categorizing smuggling as a grave crime with severe penalties, immediate closure of illegal petrol pumps, and launching comprehensive anti-smuggling campaigns to raise public awareness and support.
The gravity of the situation necessitates concerted efforts by government agencies, industry stakeholders, and the public to curb fuel smuggling and safeguard Pakistan’s economy and environment from its detrimental effects.
