Pakistan's oil refineries have urged regulators to crack down on the smuggling of around 5,000 tonnes of high-speed diesel (HSD) into the country every day.
In a joint letter to the Oil and Gas Regulatory Authority (OGRA), refineries said the cross-border inflow is undermining local operations, threatening investment, and causing heavy losses to the national exchequer.
How much diesel is being smuggled into Pakistan?
The estimated 5,000 tons per day of high-speed diesel smuggled into Pakistan is nearly 23% of the total national demand of about 22,000 tons.
The smuggled diesel, much of it from Iran, is sold at lower prices than locally refined fuel. This suppresses demand for domestic products and forces refineries to operate below capacity.
The government is reportedly losing around PKR 80 per liter in petroleum levy and customs duties. That equals an estimated revenue loss of about PKR 475 million per day.
The estimates were shared with Nukta by Adil Khattak, who chairs the energy committee of the Overseas Investors Chamber of Commerce and Industry (OICCI).
Why are Pakistani refineries warning OGRA?
In a joint letter to the OGRA chairman, refineries urged authorities to intensify enforcement against the increasing cross-border inflow. They asked regulators not to curtail refinery production instead.
The letter referenced an OGRA meeting held over the weekend to discuss low upliftment from local refineries. It was also copied to the federal energy minister and the petroleum division secretary.
Refiners warned that unchecked inflows could rise to levels seen in previous years. That would adversely affect refinery throughput, operational sustainability, and the domestic fuel supply chain.
How did Balochistan's diesel decision worsen the crisis?
According to Khattak, the crisis intensified after the Balochistan government announced in April that the sale of smuggled Iranian diesel at lower prices would be permitted within the province.
"Once such sales are permitted officially in Balochistan, it would be practically impossible to confine the product to the province alone," he said.
Khattak rejected arguments that tolerating smuggling could conserve foreign exchange reserves. He said smuggling transactions are conducted in hard currency through unofficial channels.
How is smuggling affecting refinery investment?
Khattak criticized suggestions that domestic refineries should cut diesel production to adjust for weaker demand. He said such an approach would send extremely negative signals to the refining sector.
He warned that continued smuggling could delay Pakistan's refinery modernization plans. These require billions of dollars in investment for upgradation and capacity enhancement.
"How can refineries be expected to invest billions of dollars in upgradation and capacity enhancement when their existing production cannot be sold due to unchecked smuggled inflows?" Khattak asked.
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