Pakistan’s oil industry imports 20-25 consignments per month, worth Rs15-25 billion each.
Oil tankers parked at a terminal at a port in Karachi. PHOTO: AFP
The Oil Companies Advisory Council (OCAC) has raised the alarm over a potential crisis in fuel imports following the Sindh government’s demand for mandatory bank guarantees.
In an urgent letter to the Ministry of Energy and the Petroleum Division, OCAC warned that if the problem is not resolved, the importation of petroleum products may stop in the coming months.
Customs clearance of oil shipments at Karachi port was delayed due to the provincial government’s implementation of a 1.8 percent levy on Sindh’s infrastructure development on Monday, sparking fears of a nationwide fuel shortage.
The 1.8% tax is expected to increase the cost of petroleum products by more than Rs3 per litre. Even if fuel prices are regulated, the imposition of this tax will have a direct impact on consumers.
The threat of shortage of petroleum products was temporarily averted after the Sindh government allowed a Pakistan State Oil (PSO) vessel to carry out a 15-day engagement.
The Sindh Excise Department subsequently issued a second urgent notice to OMCs, directing them to submit required bank guarantees in lieu of undertakings. The ministry clarified that company files will only be processed once guarantees have been received.
“The industry cannot be held responsible for any disruption to the supply chain if imports were affected,” the council warned, stressing that it had repeatedly urged successive governments to address the issue.
Read: Fuel shortage temporarily eases as Sindh clears PSO vessel
“This is a long-standing issue for the industry which periodically resurfaces without resolution, and this office has repeatedly sent letters regarding this matter to your good offices. While the SIDC vires remain under the jurisdiction of the Honorable Supreme Court of Pakistan, the Supreme Court has passed an interim order dated September 1, 2021, requiring that BGs be provided for all imports in order to obtain the same. customs clearance (“Provisional Order”),” the letter states.
The letter describes the immediate intervention of the Ministry of Energy as essential to ensure uninterrupted fuel supplies across the country.
Pakistan’s oil industry imports between 20 and 25 batches every month, with each batch worth between 15 and 25 billion rupees.
OCAC adds that no company in the sector has 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 OCAC, oil cargoes being unloaded, as well as ships anchored in ports, require immediate customs clearance.
The letter said PSO’s tankers – MT Islam 2 and MT Hanifa – were docked and awaiting clearance. He added that oil stocks at the Keamari terminal are running out and the two Karachi Port Trust (KPT) vessels must be cleared without delay.
Learn more: Nationwide fuel shortage feared as Sindh imposes infrastructure tax on oil imports
“Only after customs clearance can the continuity of the oil supply chain across the country be ensured,” OCAC warned.
The Oil Marketing Association of Pakistan (OMAP) has also warned that the 1.85 per cent tax for infrastructure development and the requirement for mandatory bank guarantee could disrupt oil imports across the country.
OMAP President Tariq Wazir Ali has warned that the Sindh government’s new policy poses a “serious threat” to the national oil supply chain. He warned that unless the bank guarantee condition is lifted, Pakistan’s oil imports could face serious disruptions, potentially leading to shortage of petrol and diesel across the country.
“This issue requires urgent attention,” Ali stressed. “If action is not taken in time, the country could face a serious fuel shortage, which would impact both the economy and industry,” he added.
