Pakistan’s oil industry imports between 20 and 25 shipments monthly, worth between Rs 15,000 and Rs 25,000 million 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 possible 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 warned that if the problem remains unresolved, the import of petroleum products could stop in the coming months.
Clearance of oil shipments at Karachi port was delayed due to the provincial government’s imposition of a 1.8% Sindh infrastructure development tax on Monday, raising fears of a nationwide fuel shortage.
The 1.8% tax is expected to increase the cost of petroleum products by more than Rs 3 per liter. Although fuel prices are regulated, the imposition of the tax will have a direct impact on consumers.
The threat of shortage of petroleum products was temporarily averted after the Sindh government cleared a Pakistan State Oil (PSO) vessel to fulfill a 15-day commitment.
Subsequently, the Sindh Excise Department issued a second urgent notice to the OMCs, directing them to submit the required bank guarantees in lieu of undertakings. The department has stated that companies’ cases will only be processed once guarantees are received.
“The industry cannot be held responsible for any disruption to the supply chain if imports were affected,” the council warned, stressing that it has repeatedly urged successive governments to address the issue.
Read: Fuel shortage temporarily eased as Sindh clears PSO vessel
“This has been a long-standing issue for the industry recurring periodically without resolution, and this office has repeatedly sent letters regarding the same to your good office. While the vires of SIDC remain sub-judice before the Hon’ble Supreme Court of Pakistan, the Supreme Court passed an interim order dated September 1, 2021, requiring BGs to be provided against all imports to obtain clearance of customs of the same (“provisional Order”),” the letter says.
The letter described the immediate intervention of the Ministry of Energy as essential to ensure uninterrupted fuel supply throughout the country.
Pakistan’s oil industry imports between 20 and 25 shipments every month, each of which is worth between Rs 15,000 and Rs 25,000 crore.
The OCAC added that no company in the sector has the financial capacity to grant bank guarantees of such magnitude.
Scarcity fears
The Oil Companies Advisory Council (OCAC) had earlier written to Sindh Chief Minister Murad Ali Shah to raise alarm over the situation. According to OCAC, oil cargoes currently being unloaded, as well as ships anchored in ports, require immediate customs clearance.
The letter stated that PSO’s tankers (MT Islam 2 and MT Hanifa) are docked and awaiting clearance. He added that oil reserves at Keamari terminal are running out and the two vessels at Karachi Port Trust (KPT) should be cleared by customs without delay.
Read more: Nationwide fuel shortage feared as Sindh imposes infrastructure halt on oil imports
“Only after customs clearance can the continuity of the oil supply chain throughout the country be guaranteed,” the OCAC warned.
The Petroleum Marketing Association of Pakistan (OMAP) also warned that the 1.85% infrastructure development tax and mandatory bank guarantee requirement could disrupt oil imports across the country.
OMAP president Tariq Wazir Ali 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 status is withdrawn, Pakistan’s oil imports could face severe disruption, potentially leading to shortages of petrol and diesel across the country.
“This issue requires urgent attention,” Ali emphasized. “If timely measures are not taken, the country could face serious fuel shortages, which would affect both the economy and industry,” he added.
