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November 8, 2019

LPG smuggling from Iran through Taftan going on

National

November 8, 2019

ISLAMABAD: A huge quantity of substandard LPG having sufficient sulphur content is being smuggled through the Taftan border from Iran, which has not only put legitimate importers of the product at a disadvantageous position but also made the top mandarins of the government worrisome as the smuggling can attract the wrath of FATF (Financial Action Task Force).

Pakistan is already under the spanner of FATF and is trying from pillar to post to get into the white list from the grey list. Some countries including India want Pakistan in the black list of FATF. The Oil and Gas Regulatory Authority (OGRA) has already warned in this regard, saying that the US has robust sanctions regime targeting Iranian Petrochemical Sector (IPS), which is why potential buyers of Iranian LPG in Pakistan may not be aware of the sanctions or need to exercise greater due diligence regarding the origin of product. The import of LPG from Iran is tantamount to violation of US sanctions. Despite the warning by OGRA, the import of LPG from Taftan is underway. Owing to this very fact, the legitimate importers have decided not to import LPG through sea, which may trigger a massive LPG deficit in the country next month i.e. December.

This was noticed in the meeting held here on Wednesday evening at the Petroleum Division with Special Assistant to Prime Minister on Petroleum Nadeem Babar in the chair. Secretary petroleum, DG LGs, and managing directors of PSO, OGDCL, MOL, PPL, PARCO also attended the meeting.

The LPG producers and marketing companies in the meeting came down heavily on the representatives of LPG Transportation Association responsible for smuggling of LPG into Pakistan from Iran. They said that substandard LPG containing high sulphur content with massive under-invoicing was being imported. This is not only inflicting a huge loss on national exchequer but also causing blasts in LPG cylinder due to high sulphur content in it.

Nadeem Babar, Special Assistant to PM on Petroleum, when contacted, confirmed it, saying he had chaired the meeting and the issue of smuggling of LPG trough Taftan border from Iran had been brought into notice in a big way. He said that LPG smuggling into Pakistan was not tolerable anymore as Pakistan was already under the eye of FATF.

To a question, he said that the meeting of LPG stakeholders was convened about its pricing and availability in the winter season. In the meeting, the SAPM said, he had gone through the issues of LPG pertaining to smuggling of LPG, and reservation of local producers and LPG imported through sea. Within days, the concerned authorities will carve out a strategy with an aim to ensure maximum LPG stock.

However, officials who attended the meeting said that some of the LPG was imported through Taftan after some taxes but most of it was being smuggled into Pakistan. Asked when gas import through proposed IP gas line from Iran was not allowed in the presence of US sanctions, then how some portion of LPG was being imported with taxes, the officials failed to answer the question.

The total demand in the winter season hovers around 155,000 metric tons per month out of which 30,000 tonnes is being imported from Iran (land route), 15,000 tons through sea. However, local refineries and producers are producing 70,000 tons of LPG per month. The cost of LPG being imported through Taftan is the lowest at $91 per ton whereas the imported one's cost through sea is over $106 per ton and the cost of local refineries stands at $93.9 per ton of LPG.

Officials said that the import via sea was not feasible due to substandard supply via land through Taftan and the cost difference of Rs11,550 per ton can lead to shortage of 30,000 to 50,000 metric tons in the country. They said that the imported LPG through the Taftan border has also impacted local refineries directly due to having cheaper rate of Rs2,000 to 3,000 per ton. The official said that in the meeting it was suggested that the regulatory duty of Rs4,669 per ton and 17 percent GST should be imposed on LPG being imported through Taftan border from Iran and to change the sea import advance tax to normal tax as applicable on local refineries to remove the disparity. But the high-ups in the meeting did not entertain this suggestion, saying it would be better if the import of LPG through sea was encouraged and import through Taftan was discouraged altogether to avoid FATF's wrath.