Pakistan’s petroleum industry imports 20 to 25 consignments monthly, worth Rs15 to 25bn each
Oil tankers parked at a terminal at a port in Karachi. PHOTO: AFP
The Oil Companies Advisory Council (OCAC) has raised an alarm over a potential fuel import crisis following the Sindh government’s demand for mandatory bank guarantees.
In an urgent letter to the Ministry of Energy and the Petroleum Division, the OCAC cautioned that if the issue remains unresolved, the import of petroleum products could come to a halt in the coming months.
The clearance of petroleum consignments at Karachi Port had been delayed due to the provincial government’s enforcement of a 1.8% Sindh Infrastructure Development Cess on Monday, prompting fears of a nationwide fuel shortage.
The 1.8% cess is expected to increase the cost of petroleum products by more than Rs3 per litre. Although fuel prices are regulated, the levy’s imposition will have a direct impact on consumers.
The threat of a shortage of petroleum products was temporarily averted after the Sindh government cleared a Pakistan State Oil (PSO) vessel on a 15-day undertaking.
The Sindh Excise Department later issued a second urgent notice to OMCs, directing them to submit the required bank guarantees instead of undertakings. The department has stated that companies’ cases will only be processed once the guarantees have been received.
“The industry cannot be held responsible for any disruption to the supply chain should imports be affected,” the council warned, stressing that it has repeatedly urged successive governments to address the matter.
Read: Fuel shortage temporarily eases as Sindh clears PSO vessel
“This has been a long-standing issue for the industry which keeps recurring periodically without resolution, and this office has repeatedly sent letters in relation to the same to your good office. Whilst the vires of SIDC remain sub-judice before the Honourable Supreme Court of Pakistan, the Supreme Court has passed an interim order dated September 1, 2021, requiring BGs to be furnished against all imports to procure clearance of the same (“interim Order”),” the letter states.
The letter described immediate intervention from the Ministry of Energy as essential to ensure an uninterrupted fuel supply across the country.
Pakistan’s petroleum industry imports between 20 and 25 consignments each month, with each consignment worth between Rs15 billion and Rs25 billion.
The OCAC added that no company within the sector possesses the financial capacity to provide bank guarantees of such magnitude.
Fears of shortage
The Oil Companies Advisory Council (OCAC) had earlier written to Sindh Chief Minister Murad Ali Shah to raise the alarm over the situation. According to the OCAC, petroleum cargoes currently being discharged, along with ships anchored at ports, require immediate customs clearance.
The letter stated that PSO’s oil tankers – MT Islam 2 and MT Hanifa – are berthed and awaiting clearance. It added that oil stocks at the Keamari terminal are running low and that the two vessels at Karachi Port Trust (KPT) must be granted customs clearance without delay.
Read more: Nationwide fuel shortage feared as Sindh imposes infrastructure cess on oil imports
“Only after customs clearance can the continuity of the petroleum supply chain across the country be ensured,” the OCAC cautioned.
The Oil Marketing Association of Pakistan (OMAP) also warned that the 1.85% Infrastructure Development Cess and mandatory bank guarantee requirement could disrupt petroleum imports across the country.
OMAP Chairman Tariq Wazir Ali cautioned that the Sindh government’s new policy poses a “serious threat” to the national petroleum supply chain. He warned that unless the bank guarantee condition is withdrawn, Pakistan’s oil imports could face severe disruptions, potentially leading to a shortage of petrol and diesel nationwide.
“This issue requires urgent attention,” Ali emphasised. “If timely action is not taken, the country could face a severe shortage of fuel, impacting both the economy and industry,” he added.
