Smuggled Iranian diesel is largely meeting its inflated demand in the current harvesting season in the country as diesel demand for formal sources has plunged massively.
Pakistan witnessed 30,000 MT of diesel consumption in March last year, which was met through import and local production at the refineries. A spike in demand is seen in March due to the harvesting.
However, diesel supply from the formal channel i.e. production of local refineries and import showed a massive drop. The month of March this year witnessed only 12,000 MT of consumption despite the spike in the demand due to the harvesting of wheat, which started in the southern parts of the country. Wheat harvesting starts in the central and upper parts of the country in April.
“The demand has been met through Iranian diesel, which is being supplied in huge quantity due to huge difference in the price of Pakistani and Iranian diesel,” people in the oil sector said.
They pointed out that diesel stocks in the country have risen 650,000 MT, which are sufficient to meet the requirements of 44 days. However, these stocks may see further surge as Iranian diesel has replaced Pakistani diesel.
According to them, the government has also turned a blind eye towards diesel smuggling from Iran as the country is facing a dollar crunch and is not in a position to import diesel or crude oil. Even, the oil industry has been asked not to make hue and cry over Iranian diesel as there was no option but to rely on it to meet the demand.
According to those in the oil industry, the government was incurring around Rs1 billion daily loss in terms of tax collection because of diesel smuggling from Iran.
However, the brunt of the problem would also be faced by the domestic refineries as diesel is the major product these refineries produce from the crude oil. Their stockpiles are accumulating because locally produced diesel is not being used in the presence of the option to use cheaper diesel from Iran.
“We fear that the operations of refineries would be adversely impacted if Iranian diesel started coming in unchecked. In such a situation, where diesel is not lifted, the refinery operations would not be economically feasible,” they feared.
According to the oil industry officials, refineries have already been facing the brunt of furnace oil glut, after power plants refused to lift it because of low electricity demand. Now diesel stocks are piling up as Iranian smuggled diesel has been fast replacing it due to its low price.