Business

More Iranian fuel being smuggled to Pakistan

Dealers say 35% of diesel sold in country has reached markets illegally

Reuters May 10, 2023

People on motorcycles wait for their turn to get petrol at a petrol station, after Pakistan Petroleum Dealers Association (PPDA) announced a countrywide strike, in Karachi, Pakistan, November 25, 2021. PHOTO: REUTERS

KARACHI:

Petroleum dealers have flagged a surge in the smuggling of Iranian fuel to Pakistan, saying that up to 35% of diesel sold in the country has arrived illegally from Iran, the Pakistan Petroleum Dealers Association (PPDA) told Reuters on Tuesday.

The association said that in the past, the smuggling of fuel was limited to the province of Balochistan, but it has now spread to the rest of the country.

In April, the energy ministry asked security forces to clamp down on fuel smuggling from Iran, according to an official memo seen by Reuters. The memo said diesel sales have slumped “more than 40%” due to smuggled products.

Pakistan mostly meets its demand for fuel from the Middle East, but it is also smuggled in through its western border with Iran.

The minister of state for petroleum was not immediately available for comment.

The country is facing a balance of payments crisis with barely enough foreign exchange reserves to cover a month’s imports. It is undertaking several measures, including raising fuel prices, to unlock a $1.1 billion tranche of aid from the International Monetary Fund.

Fuel prices have jumped Rs143, or nearly 100%, in the last 12 months.

Oil product sales have dropped 46% to 8.8 million barrels in April compared to last year, according to the Oil Companies Advisory Council. A breakdown shows diesel sales have slumped 50% year-on-year. This excludes smuggled fuel.

According to an S&P Global Commodity Insights report, Iranian fuel is around Rs53 cheaper than the official retail price per litre.

“Private dealers have been able to make decent profits by selling Iranian diesel Rs35-per-litre cheaper than local dealers,” it added.

The energy ministry said that according to the Oil and Gas Regulatory Authority (Ogra), around 4,000 tonnes per day of fuel smuggled into Pakistan was causing a total revenue loss of around Rs10.2 billion a month.

PPDA said that Iranian fuel smuggled into Pakistan was further hurting the industry, already reeling from low sales.

Published in The Express Tribune, May 10^th, 2023.

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