Excessive diesel imports leave local refineries in pursuit of buyers
KARACHI: Excessive imports of high speed diesel (HSD) have created supply glut of the product in Pakistan, leaving local refineries in hot pursuit of buyers, sources said on Thursday.
Official data showed that oil marketing companies imported 285,000 metric tons of HSD in July against the requirement of 267,400mt to meet the shortfall.
The monthly demand was 671,400mt as against the local production of 404,000mt.
The data showed that 17,600mt of imports were unnecessary. The similar trend was in August and September when excess quantities of 199,600mt and 227,000mt were imported.
The sources said the needless imports caused wastage of foreign exchange and neglected the supplies from the local oil refineries.
They said Pakistan has high HSD inventory-to-usage ratio, leaving no space for a continuous production by the local refineries.
“The imports are also in violation of a decision of the Economic Coordination Committee, dated February 25, 2013, which binds OMCs [oil marketing companies] to take a certificate that the local refinery runs dry prior to import HSD,” said a source.
An OMC official, however, defended the import.
“We imported as per the plan,” said a spokesperson at the Pakistan State Oil (PSO), the country’s leading oil marketing company.
“There has been growth in October due to normalisation of operation post-floods in country and commencement of harvesting.” The company official said floods in the midyear and recent heavy rains and earthquake caused a major decline in the diesel consumption in the country.
“PSO has sufficient storage of HSD in the country and is also proactively rescheduling and cancelling its future cargoes in light of the prevailing market demand,” said the spokesperson.
Early this year, the country experienced shortage of petroleum products, causing public inconvenience.
The sources said government took stopgap measures by importing petroleum products to overcome shortage.
“The short-term arrangement became an ongoing practice triggering high imports by OMCs,” a source said.
“High stocks of HSD available with oil refineries are causing billions of rupees losses to national exchequer.”
In the quarter under review, refineries and OMCs incurred a loss of more than five billion rupees.
A source said the Pakistan Refinery and PARCO have asked the ministry of petroleum several times to help the local refineries, “but it seems the ministry has no grip over marketing companies to ensure product disbursal from refineries.”
“It is surprising that PSO has funds for import but not for procurement from local refineries,” he said.
The PSO defaulted on payments to local refineries.
Moreover, the sources said the imported tankers are creating congestions at the ports as well as drainage of foreign exchange in terms of demurrage.
Total demurrage payment in first quarter of this fiscal is estimated at Rs256 million.
The PSO spokesperson said demurrages are an inherent feature in the shipping industry and majority of importers face it due to country’s infrastructure constraints and abrupt fluctuation in demand pattern. The changing demand is due to various reasons, the official said.
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