Subsidy ‘reversal’: Diesel disappearing in small cities on hoarding

KARACHI: As the government weighs ceasing fuel subsidy to ensure the IMF loan, diesel, the main transport fuel, is nowhere to be found in smaller stations in Punjab courtesy hoarding, officials said, warning the crisis was not far from big cities.

Sources in the oil sector said the hoarding of diesel has started in view of likely price hike in the next fortnightly review, which looks imminent after the government agreed with the International Monetary Fund (IMF) to withdraw the fuel subsidy.

Though Oil & Gas Regulatory Authority (OGRA) and Oil Companies Advisory Council (OCAC), the representative body of oil sector companies, are denying any shortage of diesel in the country. The officials added that consumption of diesel surged phenomenally and its ex-depot sale doubled in just one week.

Now the average sale of diesel stands at 37,000 tonne, which was 20,000 tonne per day last week. “This number shows how much diesel has been released from the depot,” sources said and noted it was hard to ascertain how much diesel was being supplied by petrol pumps.

A top OMC official said fuel outlets were resorting to hoarding diesel, while farmers were also following their suit to store as much cheap diesel as possible for harvesting before its prices shoot up. “The supply side constraints are still restricted to smaller cities but will soon extend to big cities near the next review of oil prices,” the official said.

On the other hand, freezing of price diesel domestically and its high price in the global market have also halted the import of diesel by smaller OMCs. Meanwhile, local refineries are producing more diesel compared to past but its hoarding is offsetting the benefits of increased production.

According to production figures of local refineries, 433.246 tonnes of diesel was produced in March compared to 350,189 tonnes in January, which is 83,056 tonnes higher and production of diesel in March this year is also almost 34,000 tonne higher than the same month of last year.

Chief executive of a local refinery told The News that production had increased but the hoarding of diesel was blocking the supply of diesel smoothly. He said presently Pakistan’s diesel stock was at 436,360 tonnes, which was sufficient for 12 days, if calculated on the basis of a sale of 37,000 tonne per day.

The stock was sufficient for 27-28 days two weeks back, but decreased to 18 days and now 12 days because of higher sales. “The reason is simply, everyone knows that diesel prices will shoot up in the coming review, so petrol pumps are hoarding it and farmers are also storing in more quantity for harvesting purposes”, he stated.

State-owned OMC, Pakistan State Oil (PSO), also admitted that diesel demand was increasing, mainly because of harvesting season and limited product availability/imports by other market players and declared it had arranged five additional HSD cargoes from March till May 2022.