POL products smuggling causes $1bn loss a year: OCAC

ISLAMABAD: According to an alarming disclosure, the country is braving $1 billion loss per annum just because of smuggling of POL products into the country.

Around 10 million litres of petroleum products are smuggled into Pakistan every day through land and sea routes, accounting for 20 per cent of Pakistan’s yearly consumption and resulting in huge losses to the national exchequer of about $1 billion.

This fact has been revealed in a letter of the OCAC (Oil Companies Advisory Council) written on Friday and addressed to the Ogra chairman, telling the regulator that the new spike in smuggling of POL products posed a serious and existential threat to the country’s oil industry.

It is also jeopardizing the collection of the government revenue stream on legitimate sales of High Speed Diesel and MS (Motor Spirit) in the country, especially when the government is in dire need of these revenues to run the country’s affairs.

The OCAC letter, while referring to the reports of various agencies of the government, mentioned how POL products’ smuggling had been inflicting huge financial losses on the country’s economy. The letter, while quoting reports of various government agencies, said around 10 million litres of petroleum products were smuggled into Pakistan per day through land and sea routes, which accounted for about 20% of Pakistan’s yearly consumption, and resulted in losses to the exchequer of about $1 billion per annum.

“The quantity of smuggled petroleum products into the country reduced few months back as a result of a crackdown launched by the government, but, unfortunately, the influx of smuggling has again resurged during the past few months. This is expected to increase further if strict and timely measures are not taken,” the letter warned.

The massive influx of smuggled petroleum products into the country is adversely impacting the national oil supply chain, including operations of the white oil pipeline, refineries & OMCs in Pakistan, and if it continues unabated, it will lead to permanent closure of the country’s domestic refining sector. “There are also visible detrimental effects of substandard petroleum products in the country, which are linked with other illegal activities impacting our society at large. The harms of smuggling are not limited only to present economic and social dynamics but are also gravely impacting the possibilities of Foreign Direct Investment (FDI).”

The country’s five refineries, all members of OCAC, are facing severe challenges in the upgradation of their respective refineries under the Brownfield Refining Policy announced by the GOP due to the influx of smuggled petroleum products. The illicit activity could seriously jeopardize the opportunity for a huge investment of $ 6 billion in Pakistan’s refining sector. The country’s overall economic indicators, including the GDP posted a modest recovery of 2.38% in FY2024, yet the overall sales of petroleum products, especially MS and HSD, have posted a negative growth of about 5%. Such a high variance clearly signifies product gluts, lower throughput, choking of the white oil pipeline and restrained OMCs sales.

The letter said: “While the unabated smuggling of petroleum products from the bordering country continues, we have been equally alarmed about an important issue, as recently reported in the print media where importers through the Taftan Terminal were bringing Light Aliphatic Hydrocarbon Solvent Oil, a hazardous petroleum product.”

“There were credible reports that this solvent oil was being used as an adulterant in petrol and was directly offloaded at petrol pumps in various parts of the country. The free flow of smuggled products, which previously was mainly confined to border areas, has penetrated Rawalpindi, Islamabad and even Peshawar.”