Oil industry raises concerns over HSD imports

KARACHI: The Oil Companies Advisory Council (OCAC) has expressed severe concerns about the impact on the oil sector of allowing a single oil marketing company (OMC) to import what they consider are excessive amounts of high-speed diesel.

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In a letter to the chairwoman of the Oil and Gas Regulatory Authority (Ogra), the OCAC stated that the OMC’s HSD imports, which began at 15,000 MT per month, had increased to 40,000 MT per month. They claim that this inflow is being allocated in the market through unfair means.

Despite the fact that local oil refineries have extra product and greater storage capacity, Ogra continues to accept higher HSD imports from private OMCs without taking into account genuine national demand, which is already constrained by cross-border movement, according to the oil body.

The OCAC condemned the practice of pouring cash and investment into an OMC at the cost of local industry via unneeded imports. This strategy not only challenges the long-standing tradition of prioritizing refinery upliftment, but it also puts strain on Pakistan’s foreign exchange reserves.

The council further stated that the private OMC in issue is giving discounts of around Rs10 per liter, which exceeds the OMCs’ margin of Rs7.87 per litre. This enormous discounting is reducing other firms’ market share and encouraging illegal dumping at other stations, despite the fact that these reductions do not result in decreased gasoline costs for consumers.

The OCAC emphasized the necessity for Ogra to investigate how a private firm can give such substantial discounts that exceed its profits. They also reported allegations of illegal petroleum goods entering Pakistan, implying a link between the discounts and smuggling.

While Ogra has final responsibility and power over import approvals, the OCAC has asked the regulator to prioritize the survival of the domestic oil industry. It highlighted that any OMC that refuses to lift products from refineries and imposes excessive commercial terms should not be accommodated with more imports. Notably, PSO has canceled around 450KT of HSD imports since January 2024 to help refineries at a period of low demand.

The OCAC also advised that no imports from non-Kuwait Petroleum Corporation (KPC) sources be allowed. Any OMC wishing to import HSD should be obliged to collaborate with refineries and meet previous upliftment commitments.

The disregard for genuine national demand is damaging the domestic sector and encouraging unscrupulous practices, putting additional strain on Pakistan’s foreign exchange reserves. The OCAC expressed significant worry about the situation, which they feel fosters unfair competition and harms the sector, and urged OGRA to conduct a comprehensive investigation and take appropriate measures to safeguard genuine firms in Pakistan.