Fuel crisis looms as POL cargoes held over tax dispute

ISLAMABAD: Pakistan faces an imminent nationwide fuel shortage as multiple petroleum cargoes remain stranded at ports due to the Sindh government’s sudden reinstatement of a 100 per cent bank guarantee requirement under the Sindh infrastructure development cess (IDC) — a move the oil industry warns could cripple the country’s fuel supply chain within days.

The Oil Companies Advisory Council (OCAC), in its letter written on Monday to the chief minister of Sindh and federal authorities, said that at least five major petroleum shipments, including vessels carrying petrol and diesel for PSO, HPL, PGL and Parco, are currently awaiting customs clearance at Karachi ports. With Motor Spirit (petrol) stocks at Keamari rapidly depleting, the industry has warned of severe nationwide disruptions, particularly during the ongoing agricultural season, if immediate action is not taken.

“The oil supply chain is on the brink of collapse. Recovery could take over two weeks if cargoes are not cleared now,” the OCAC added.The dispute centres on the 1.8 per cent IDC levied by the Sindh and Balochistan governments on POL imports. While the Supreme Court is still hearing the case, the Sindh Excise Department has abruptly withdrawn an interim arrangement, previously allowing undertakings instead of bank guarantees, and is now demanding billions of rupees in guarantees per vessel, a financial burden the industry says it simply cannot bear.

With regulated pricing, tight credit lines and razor-thin margins, the OCAC estimates that IDC adds over Rs3 per litre to the cost of fuel, a burden that cannot be passed on to consumers under current pricing mechanisms.

The council is urging the Federal Board of Revenue (FBR) and Pakistan Customs to immediately clear all petroleum cargoes without bank guarantees, and is calling for a policy-level resolution, including i) formal recognition that petroleum pricing is a federal subject; ii) inclusion of IDC in fuel pricing mechanisms and iii) a framework to recover past IDC dues.

The OCAC also pointed out that Punjab and Khyber Pakhtunkhwa have already exempted POL products from IDC, aligning with federal jurisdiction over petroleum pricing.Unless swift action is taken, Pakistan could face fuel station dry-outs, disrupted transport and logistics, and serious delays in the agricultural sector, potentially triggering broader economic consequences, the council added.