Illegal fuel trade resurges, costs govt Rs1.5bn daily: OCAC

KARACHI: The illicit sale of petroleum products has surged in recent days due to the availability of high-speed diesel (HSD) and petrol at alarmingly low prices, the country’s oil sector has warned.

In a letter to the Director of Customs Intelligence, Federal Board of Revenue (FBR), the Oil Companies Advisory Council (OCAC) acknowledged the FBR’s efforts to curb illegal trade, particularly in shutting down illegal petrol pumps, unlicensed oil agencies and cross-border smuggling. These measures significantly reduced illicit fuel trade, leading to a notable increase in nationwide fuel sales from September to December 2024 compared to the same period last year. This also contributed to substantial revenue generation for the government and had a positive impact on the economy, the letter stated.

However, the OCAC expressed concerns over a recent decline in fuel sales as of February 2025. The oil body stated that reliable sources indicate illicit trade has resurfaced, with smuggled HSD being sold at an alarmingly low price of approximately Rs180 per litre, compared to the current market rate of Rs258.64 per litre. The adulteration of Motor Spirit (MS) with Light Aliphatic Hydrocarbon and Solvent remains unresolved, with reports suggesting that adulterated MS is being sold at Rs160 per litre, significantly below the regulated price of Rs255.63 per litre. The OCAC warned that this resurgence of illegal fuel trade is not only disrupting legitimate businesses but also causing a substantial revenue loss of approximately Rs1.5 billion per day for the government.

The adverse impact of illicit fuel sales is already visible in declining fuel demand. HSD sales in February 2025 stood at 419,494 metric tonnes, reflecting a 6.0 per cent drop compared to 445,263 metric tonnes in February 2024. Similarly, preliminary data indicates that MS sales for March 2025 -- when prorated -- are projected to be 5.0 per cent lower than in March 2024. Moreover, planned sales volumes based on September to December 2024 trends are lower by 13 per cent for MS and 16 per cent for HSD in March 2025, despite the start of the agricultural season.

In light of this situation, the OCAC urged the authorities to take immediate action to curb the resurgence of illicit fuel trade. The council called for the closure of illegal retail sites and the implementation of strict measures to prevent their re-emergence. It also emphasised the need for stronger border controls, which could contribute 4,000 to 8,000 metric tonnes of fuel daily to the economy. It stressed the importance of restricting the import of white spirit, which is commonly used as an adulterant in HSD.

The OCAC highlighted that past enforcement efforts were instrumental in controlling fuel smuggling and expressed hope that continued vigilance would help address the current challenges effectively.