Diesel imports hit three-month high on smuggling curbs

KARACHI: Pakistan imported more high-speed diesel in September than in any month since the start of the fiscal year, as the government stepped up efforts to curb smuggling and demand rose from the formal sector, oil industry officials said on Friday.

The country has imported 120,954 tonnes of high-speed diesel, or HSD, in September, up from 109,745 tonnes in August. The country did not import any HSD in July, as it relied on domestic production and smuggled fuel from Iran to meet its needs.

The country has imported a total of 230,799 tonnes HSD in August and September. "The import of HSD remained subsided since the start of the current fiscal year, as smuggled Iranian diesel captured the market by taking away the major share in the domestic market, which kept the sale of HSD by oil marketing companies depressed," an industry official said.

"The diesel demand in the country from the formal sector was so low that the country did not import HSD in July, as the smuggled Iranian diesel as well as the production of HSD in the local refineries catered to the domestic demand of diesel."

The increase in imports came as the government cracked down on smuggling and demand picked up from the formal sector, which includes transport, industry and agriculture. Smuggling has been a major challenge for Pakistan’s oil sector, as cheaper Iranian diesel has captured a large share of the market and reduced the sales of local oil marketing companies. The diesel imports, however, witnessed some growth in September as demand increased, the official said. The industry expects the trend to continue in the coming days, as diesel prices declined and border security tightened.

HSD sales dropped to 394,000 tonnes in September, the lowest since the Covid-19 lockdown in March 2020. The sales were down 24 percent year-on-year and 28 percent month-on-month. Industry officials attributed the low sales to various factors, including record-high prices, low agricultural activity and power generation. HSD prices rose 12 percent from Rs293 per liter in August to Rs330 per liter in September, discouraging consumption. The low sale of September was also attributed to low consumption in agriculture sector as August and September are usually the months in which agriculture activity is not on higher side, which results in drop of HSD sale.

They said that the HSD imported in September would be consumed in October and its sales number would see growth. “Recent decline in diesel price along with tight security over borders will improve next month oil sales,” the official said. Pakistan’s overall sales of petroleum products were 1.06 million tonnes in September, down significantly by 31 percent year-on-year and 25 percent month-on-month.