Who should be held responsible for unabated smuggling of Iranian oil products into Pakistan?

In my earlier blogs I had raised concerns about influx of huge quantities of Iranian oil products into Pakistan. Lately, the oil marketing companies have accused Oil & Gas Regulatory Authority (OGRA) for the unabated influx of Iranian products into Pakistan.

The overwhelming perception is that being the regulatory authority entrusted with overseeing the petroleum sector, it is the responsibility of OGRA to take a proactive stance against the smuggling of Iranian petroleum products.

It is also being said that failure of OGRA to control this menace not only undermines the integrity of the regulatory, but also jeopardizes the national economy.

OMCs working under the legal ambient are already operating on a very thin margin. The smuggling of

Iranian products add to their miseries and make it even harder for them to compete with the vendors of smuggled products.

According to some sector experts, “OGRA is a ‘toothless watchdog’ and its prime duty has been to facilitate the government by raising prices of the petroleum products. It has failed in protecting the interest of consumers.” They add neither the Authority has the mandate nor the resources to curb the smuggling.”

OMCs have the right to ask the Government of Pakistan to take immediate and stringent measures to curb the smuggling of Iranian diesel/petrol.

These include strengthening border controls, enhancing coordination among the law enforcement agencies, and implementing robust monitoring mechanisms.

According to some analysts till recently the smuggled products were sold in Baluchistan Sindh, but now Punjab and even KPK are flooded with Iranian Petroleum products.

 

Iranian diesel being smuggled into Pakistan in huge quantity

According to a report by The News International, around 8,000 tons high speed diesel (HSD) is being smuggled into Pakistan from Iran on a daily basis.

Huge quantities of smuggled Iranian HSD has not only had a significantly devastating impact on the production of the domestic refineries, which have a combined HSD production capacity of about 15,000 metric tons per day, but it has also inflicted heavy revenue losses worth billions on the government, Attock Refinery Limited CEO Adil Khattak said.

The Government of Pakistan either does not understand the gravity of the situation or was just turning a blind eye due to the shortage of foreign exchange required for legal imports of the deficit products.

Smuggling of petroleum products from Iran to a limited extent has always been happening in connivance with border authorities, but the scale has never been this huge and unparalleled, which if allowed to continue unabated could lead to the shutdown of local refineries.

Khattak said that the impact of this smuggled HSD had already started showing with Attock Refinery reducing its output to 25% only.

“What is even more alarming is that the emboldened smuggler mafia, with no fear of any reprisal, is offering supply of smuggled products to OMCs (oil marketing companies) on discounted rates minus the petroleum development levy (PDL),” he said. With the presence of some unscrupulous elements amongst the OMCs, their involvement in this criminal activity cannot be ruled out.

Oil and Gas Regulatory Authority (OGRA), Interior Ministry and the border authorities need to wake up before it was too late.

Earlier, Attock Refinery had written a letter to OGRA asking for intervention to ensure the uplifting of HSD by OMCs on consistent basis to help the company operate at an optimum level.

Attock Refinery on Wednesday had announced that it would shut down its plant due to the ongoing smuggling of petroleum products from neighbouring countries.

The refinery announced that oil marketing companies had been slow to uplift HSD from Attock Refinery in recent months, due to the possibility of smuggled products entering the supply envelope.

This has led to a build-up of HSD stocks at the refinery, with very little or no space available in storage tanks. As a result, the refinery has been left with no choice but to shut down its main distillation unit, which has a capacity of 32,400 barrels per day (BPD), for a period of five days, a company statement said.

During this time, the refinery will partially operate at around 25% capacity to carry out essential maintenance work on its downstream units, it added.

The opening stocks of HSD with refineries as of the morning of May 02 stood at 17,000 tons with Attock Refinery, 20,300 tons with National Refinery, 22,000 tons with Pakistan Refinery, 40,500 tons with PARCO, and 11,000 tons with BYCO. The stocks with PAPCO and OMCs stand at 544,000 tons, which brings the total stocks at 654,000 tons.

 

Iranian exports to India rises 91% in 2 months

The value of Iranian exports to India rose 91% in the first two months of 2023, as compared to the same period of 2022, according to the data released by the Indian Ministry of Commerce and Industry.

The Indian ministry put the worth of Iran’s exports to India at US$134 million in January and February 2023, while the figure was US$70 million in the same time period of 2022, IRIB reported.

The value of trade between the two countries dropped 13% to US$358 million in the first two months of year 2023, from US$412 million in the first two months of the past year.

According to the data released previously by the Indian Ministry of Commerce and Industry, the value of Iranian export to India increased by 60% in 2022 as compared to the year 2021.

The Indian ministry put the worth of Iran’s exports to India at US$653 million in 2022, while the figure was US$409 million in 2021.

As reported, petroleum products have been the major goods imported by India from Iran during this period.

According to the data, the value of trade between Iran and India reached US$2.5 billion in 2022, rising 48 percent from US$1.693 billion in 2021.

During January-December 2022, India’s export to Iran also increased by 44% to US$1.847 billion, while the figure was US$1.284 billion in 2021.

Rice was India’s major export to Iran, during which the country shipped US$1.098 billion worth of rice to the Islamic Republic.

In late May 2022, the Iranian ambassador to India said that Iran and India are trying to diversify the channels of payments to expand bilateral trade.

In an exclusive interview with Financial Express Online, Ali Chegeni said, “We are trying to diversify the channels of payments and accordingly wish to extend and expand an already existing mechanism in order to cover all of the goods and services including all of the non-oil goods and to achieve this”.

During the past two years, because of Covid restrictions, we pursue the issue via virtual dialogues and currently, our officials are following the matter through the exchange of delegations, the envoy stated at the time.

“We want to develop our economic and trade relations beyond energy and petrochemical products. because, due to the complementarily of Iran and India's economies, an extensive range of non-oil trade exists between the two sides including trade on goods and services, investment, tourism, education, and … which may pave the way for multiplying our economic relations ten times more than current relations in mid and long terms”, Chegeni said.

 

Iranian annual export to India rises 60%

The value of Iranian export to India increased 60% in 2022 as compared to the preceding year, according to the data released by the Indian Ministry of Commerce and Industry.

The Indian ministry put the worth of Iran’s exports to India at US$653 million in 2022, while the figure was US$409 million in 2021, IRNA reported.

As reported, petroleum products have been the major goods imported by India from Iran.

According to the mentioned data, the value of trade between Iran and India reached US$2.5 billion in 2022, up 48% from US$1.693 billion in 2021.

During January-December 2022, Indian export to Iran also increased 44% to stand at US$1.847 billion, while the figure was US$1.284 billion in 2021.

Rice was India’s major product exported to Iran during this period, the country shipped US$1.098 billion worth of rice to the Islamic Republic.

In late May 2022, the Iranian ambassador to India said that Iran and India were trying to diversify the channels of payments to expand bilateral trade.

In an exclusive interview with Financial Express Online, Ali Chegeni said, “We are trying to diversify the channels of payments and accordingly wish to extend and expand an already existing mechanism in order to cover all of the goods and services including all of the non-oil goods and to achieve this”.

During the past two years, because of Covid restrictions, we pursue the issue via virtual dialogues and currently, our officials are following the matter through the exchange of delegations, the envoy stated at the time.

“We want to develop our economic and trade relations beyond energy and petrochemical products. because, due to the complementarity of Iran and India's economies, an extensive range of non-oil trade exists between the two sides including trade on goods and services, investment, tourism, education, and … which may pave the way for multiplying our economic relations ten times more than current relations in mid and long terms”, Chegeni said.