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Iranian petrol a hot commodity in Pakistan

12 December, 2006

By Amir Latif


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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.

End.

Reader Comments:

Enjoy low priced petrol as you can

I was in Iran less than 2 years ago,and through some gas engineering design by me for the Iranians, I am familiar about the energy products of the Islamic republic.

First, Iranian government is subsidizing the price of refined products very heavily for the benefit of the common man more than any other country of middle east.

The price of refined patrol in Iran is eight cents(five rupees) per liter and diesel sells for 2-3 rupees per liter there.

This is one sixth price of what the most efficient refineries can produce petrol for after purchasing crude oil at 60 USD per barrel. And Iranian refining capacity is still just under 2 million bpd making the government to import refined products and sell them with subsidies from generated profits from the crude oil exports. I found all motorists and taxi drivers happy as they could buy petrol three times cheaper than in UAE and Saudi Arabia.And the Saudi and the UAE people I met in their countries envied extremely low petrol prices in Iran. When I told my Canadian friends about how cheap petrol was in Iran,they wanted to fly to Iran and drive cars on petrol ten times cheaper than in Canada.

Iran’s energy future is so bright that it is on way to become energy and economic super power of the world. All they have to do is to let their women spend like the north American women, who are money guzzlers hooked to burning money.

By 2012, Iran is tripling its gas production to 8 trillion cubic feet per year and double its crude oil production to 7.5 million barrels per day. Iran plans to double its refining capacity to 3.5 million barrels per day in the same period. This is going to be extremely crucial for Iran, for middle east as well as for the whole world. After that Iran can easily hit the magic number ten in energy sector to become the world’s energy super power, a status enjoyed only by America now. In 2020 or earlier, only America and Iran will enjoy the magic 10 of energy for both oil and gas.By 2020, Iran,like America will be producing or refining more than 10 million barrels per day of oil and will be producing more than 10 trillion cubic feet of gas per year. Russia will have magic 10 in gas production, but will lack it in oil refining. China will have magic 10 in oil refining but will lack it in gas production. India will not only lack magic 10 in both oil and gas, but will have only one third achievement of magic 10. That is the main reason that India may falter to become a super power as 85 percent of the global energy equation is based on oil and gas.And Iran has the world's largest resources of combined oil and gas.

Iran also plans to double its population again. Iran will have all the ingredients to become a super power, which she was more than three thousand years ago as the world’s first sole super power. That is why the Bible and Ferdowsi’s Shahname describe heavily in detail about the grandness of ancient Persia.

Therefore, subsidized petrol prices in Iran are giving some petrol price breaks to Pakistanis as well. I wish there was gas price breaks to Pakistan soon through IPI. Iranian gas process companies can still make profit by selling gas to Iranian government at just over one dollar per million BTU. In America and Canada, we are paying 8-10 times as much. Then Iranian gas is so rich in LPG that they can produce 400 tons of LPG per day from 100 million cubic foot process plant, whereas in north America, the recovery from same size plant is only 200-250 tons per day due to low LPG in raw gas. That is why Iranians are making more money from International priced LPG compared to low priced sales gas sales to pipeline.

May be the Iranians want to look the other ways so that their Pakistani brothers can enjoy some relief from high priced petrol and diesel in Pakistan. It is all subsidized to the common man of Iran. Believe me you that even the most efficient refinery will spend at least six times just to produce it for. In the case of natural gas, it is different as the raw gas is provided very cheap to the gas process plants. May be the Iranian government subsidizes the crude oil pricing to its domestic refineries as well.

You can expect more of energy related miracles from Iran that will benefit our province Baluchistan the most as Baluchis are more close to Iran.You won’t buy much cheaper LPG from Iran as they export it most at international prices.

It is difficult for Pakistan government to emulate subsidized energy game like Iran as Pakistan has to import crude oil and Pakistan does not earn any money from energy exports to subsidize the petrol prices. Let Iran give the petrol and diesel goodies to Pakistan even if they are smuggled in.Turks are doing the same near Iranian borders.They drive to Iran, fill their petrol tanks in their cars and drive in Turkey for the rest of the week.The Iranians i met in Iran loved to drive as much on subsidized petrol and diesel.


Anwar Mahmood, Canada - 12 December, 2006

Iranian petrol

Govt of pakistan wants to give Iranian GAS to india legally,but can not make Smuggling of petroleum products into Pakistan legal.
Kamal hay na?

KHALID AWAN, Pakistan - 16 December, 2006

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