Iranian petrol a hot commodity in Pakistan
12 December, 2006
By Amir Latif
Smuggling of petroleum products into Pakistan has boomed during the last two years, apparently because of an all-time increase in petroleum prices in the country's history.
According to an estimate by the ministry of petroleum, the government loses Rs5 to Rs6 billion tax revenue per annum due to smuggled petroleum products.
The World Bank has advised the government of Pakistan to develop a fool-proof system to stop this practice in the best interest of all the stakeholders of this sector.
It may be mentioned here that during the last government of Nawaz Sharif the price of diesel was Rs9.90 per litre while petrol was available between Rs23 and Rs25. Over the years, the price of petroleum products increased twice, whereas in Pakistan, they were increased four times. The price of diesel, which has a large consumer base in agriculture dependent
areas, shot up to Rs39.60. As a result, its impact was felt on this sector. Cost of transporting agricultural produce rose, which in turn increased the prices of daily-use commodities four times.
Crude oil was available for $72 per barrel in the international market, which has now been decreased to $67, but this has not affected the prices of petroleum products in Pakistan.
According to a study, smuggling of petroleum products from Iran has a long history. Balochistan and Sindh were the main markets for the smuggled products, but, during the last two years, the market for smuggled oil products has expanded to Punjab and the NWFP. A wide range of smuggled lubricant brands is found in every city of Pakistan.
The only advantage of Iranian oil products is the cheaper prices. For instance, one litre of Iranian petrol costs half of the market price of one litre petrol. Moreover, increased prices of petroleum products in the market have increased the demand for smuggled products.
A survey conducted by Paktribune reveals some interesting facts as well as the connivance of government agencies concerned.
Iranian petrol and diesel are openly available in several parts of Karachi, especially which touch the katchi abadis. Iranian petrol is much cheaper than the one sold at the petrol pumps. One litre of Iranian petrol is available at Rs34 to Rs38 in Lyari, North Nazimabad, New Karachi, Nusrat Bhutto Colony, SITE and Orangi town areas, whereas a litre of Iranian diesel is being sold at Rs28 to Rs34 in respective localities.
In Hub, the vicinage Balochistan town of Karachi, one litre petrol and diesel are available at Rs32 to Rs36 , and Rs26 to Rs32, respectively.
The survey reveals that in Karachi, almost 50 per cent of public transporters use Iranian petrol and diesel, while the rest have converted their vehicles into CNG or LPG.
"We buy Iranian petrol or diesel just because of the cost difference. We have no other reason for that," Gul Khan, a taxi driver, said.
"We are unable to afford Rs60 for one litre of petrol or Rs40 for one litre of diesel," he said, adding, "we don't care if it is causing loss to the government. The government and the petroleum countries have been sucking our blood".
A shopkeeper who sells Iranian petrol and diesel in Nusrat Bhutto Colony said on the condition of anonymity that the sale of smuggled petroleum products could not be possible with police's connivance.
"We pay weekly amounts to the area police," the shopkeeper said, who dumps petrol and diesel in open drums and small containers in open air posing hazards of a huge fire.
Security sources told Paktribune that there are different routes of oil smuggling from Iran to different parts of Pakistan. For Pushtun belt of Balochistan, the oil products enter Taftan area of Pakistan, which borders with Zahidan province of Iran. From Taftan, the smuggled products proceed to Dalbadin, Noshki and then Quetta.
Iranian petrol and diesel are being sold in Quetta at every corner and street with impunity. One litre of smuggled petrol and diesel are available in Quetta at Rs30 to Rs33, and Rs32 to Rs33, respectively. Smuggled petroleum products also enter Pakistan via Afghanistan i.e. from Kandahar to Chaman. From Chaman, they proceed to Quetta, Loralai, Qila Abdullah and other Pushtun dominated districts of this rugged province.
In rest of Balochistan, Iranian petroleum products reach via Panjgoor, Kaitch, Mand and Gwadar areas.
In Gwadar, one litre of petrol and diesel are being sold at Rs25 to Rs30 and Rs24 to Rs28, respectively.
In bordering areas of Taftan, Kharan and Kaitch, prices are much lower. One litre of petrol and diesel in these areas are available at Rs20 only.
Sources say that the security agencies deployed on the bordering routes are fully involved in smuggling of Iranian petroleum products, which are usually smuggled in the wee hours raising the possibilities of major accidents.
The most horrible fact of this business is the dumping and unloading of smuggled petroleum products. Petrol and diesel are dumped in open space by shopkeepers without taking any safety measures, and supplied through canes.
"Everybody knows where this petrol or diesel comes from," a security official said. "We can't do anything to stop it as big fish are involved in this mess," he maintained.
The smuggled petroleum products have made inroads into the NWFP and Punjab too.
A few weeks ago, officials of the Sarhad Petroleum Cartage and the Dealers Association warned that they would start selling substandard smuggled petroleum if the government did not stop its sale in the province.
Mansoor Sharif, provincial chairman of the association, told a press conference that the open sale of smuggled petroleum in the province had damaged the business of local gas stations.
According to sources, petrol sold in Peshawar, Swat, Mardan, Kohat and other cities of the province is smuggled from Iran, Iraq and Central Asia via Afghanistan decreasing sales at most of the gas stations to less than 50 litres per day.
Owners of gas stations have to face a lengthy procedure to install gas stations. They have to get no-objection certificates from a number of provincial departments. On the other hand, the sellers of smuggled oil products just need to buy some small containers and grease the palms of local police.
But, irrespective of the fact that the smuggling of oil products have been causing heavy losses to the national exchequer, the growing inflation and exorbitant increase in petroleum prices have compelled people to go in the wrong way.
Ironically, the so-called people-friendly government is not ready to slash the petroleum prices in spite of the fact the prices are registering a constant decline in international markets.
On the other hand, India has cut prices of gasoline by just over four per cent and diesel by slightly above three per cent to reflect falling global oil prices in the past six months.
The price of gasoline will fall two rupees a litre to 45.49 rupees (1.02 dollars) in New Delhi while diesel will cost one rupee less at 31.45 rupees per litre. Similar price cuts outside the capital will occur subject to local tax rates. On June 5, India raised petrol prices by just over nine per cent and diesel by more than six per cent.
The Supreme Court has also expressed concern over high petroleum prices and sought a report from the Senate's Standing Committee on Petroleum and Natural Resources on the issue.
A full SC bench consisting of Chief Justice Iftikhar Muhammad Chaudhry and justices Muhammad Nawaz Abassi and Syed Saeed Ashad directed the Oil and Gas Regulatory Authority to reduce petroleum prices and directed the authorities concerned to present in court a report prepared by Senator Dilawar Abbas. Petitioner
Senator Rukhsana Zuberi told the bench that the report was on the record of the court. But, unshaken by the public outcry, the government says it has no immediate plans to slash the petroleum prices.
Minister of State for Information and Broadcasting Tariq Azeem Khan says the government has paid Rs48 billion to oil companies as Price Difference Claim (PDC) to protect consumers of petroleum products in the country.
"The government has already paid Rs28 billion under this head to oil companies and Rs20 billion is still payable out of which Rs7.5 billion is for the current financial year, despite declining prices at world market, " the minister said.
Keeping the current scenario in view the government is not in a position to reduce petrol prices in the country, he said.
"If prices remain at the current level, it will take about three months before the current amount is adjusted," he added.
The minister said the government kept the prices frozen for at least 26 months from May 2004 to October 2006, allowing partial increase only 08 times.
"We have developed a strategy to absorb most of the price increase in oil by subsidizing to the tune of Rs83 billion," he added.
This subsidy was given to maintain the prices of diesel, kerosene oil, light diesel oil which is used by the agriculture sector, low income group, transport and households.
Thus the government incurred a major revenue loss of Rs35 billion on account of PDL (Petroleum Development Levy) alone, he added.
He said as a comparison, in 1998-99 when oil prices were low approximately $10 million, the then government nevertheless collected Rs67 billion in petroleum development levy whereas the present government collected only Rs6 billion against a budgeted figure of Rs47 billion in the year 2004-05.
Secretary Petroleum Ahmed Waqar said if not subsidized, the prices of diesel could reach from existing Rs38 to Rs40 per litre, kerosene oil from Rs35 to Rs40 and light diesel oil from Rs32 to Rs34 in the country.
When his attention was drawn about petroleum prices in India, the petroleum secretary said today prices of petrol and diesel were an average 16% and 22% cheaper than India.