Pakistan is losing Rs. 250 billion annually due to the smuggling of petrol and diesel, according to a body of small oil marketing companies.
The Oil Marketing Association of Pakistan (OMAP) issued a press release in response to officials starting an audit of the downstream oil sector.
This is another in a series of audits of the sector that the government has conducted since mid-2020.
The OMAP remarked that as far as smuggling is concerned, it acknowledges that this is a serious issue, and added that “as per the Inquiry Commission Report, we are losing an estimated Rs. 250 billion per annum due to the menace of smuggling”.
It explained that the smuggling of petrol and high-speed diesel has been a major issue for over a decade because it results in sales of poor quality products.
“The petrol octane value is much below the 90 RON minimum specified for our market and is in fact naphtha of 60-70 RON,” it clarified.
Additionally, the price of such smuggled products is significantly below the market price which acts to accelerate the trade even more.
The OMAP claimed that the government has failed to address the issue of smuggling due to weak security and “suspected collusion between the smugglers and the local authorities”.
However, it objected to the series of audits that officials had launched last year and argued that they were unrelated to the issue of smuggling and were only damaging the companies’ images and discouraging investors.
“Of the six refineries of Pakistan, only two are addressed, and of the 23 Oil Marketing Companies, 60 percent are those with individual market shares of less than 0.5 percent,” it said.
The companies argued that the Oil and Gas Regulatory Authority (OGRA) had already operated a system of checks and balances in which data on the downstream oil sector is scrutinized by its independent auditors.
The OMAP said that data, including sales, imports, and local refinery production, is documented and checked by the regulator through this system. It added that the deemed duty collected is also documented and audited by the Petroleum Division.