Oil industry raises concerns over HSD imports

KARACHI: The Oil Companies Advisory Council (OCAC) has voiced serious concerns regarding the impact on the oil industry from permitting a single oil marketing company (OMC) to import what they believe to be excessive quantities of high-speed diesel (HSD).

In a letter to the chairperson of the Oil & Gas Regulatory Authority (Ogra), the OCAC highlighted that the HSD imports by the OMC, initially at 15,000 MT per month, have surged to 40,000 MT per month. They assert that this influx is being distributed in the market through unfair practices.

Despite local oil refineries having excess product and additional storage capacity, Ogra continues to approve increased HSD imports by the private OMC without considering the true national demand, which is already strained by cross-border movement, the oil body stated.

The OCAC criticized the practice of injecting capital and investment into an OMC at the expense of the local industry through unnecessary imports. This approach not only undermines the established practice of prioritizing refinery upliftment but also adds pressure to Pakistan’s foreign exchange reserves.

The council also pointed out that the private OMC in question is offering discounts of around Rs10 per litre, which exceeds the OMCs’ margin of Rs7.87 per litre. This significant discounting is damaging the market share of other companies and facilitating illegal dumping at other stations, despite these discounts not leading to lower consumer prices at petrol stations.

The OCAC stressed the need for Ogra to investigate how a private company can offer such large discounts beyond its margins. They also mentioned reports of smuggled petroleum products entering Pakistan, suggesting a possible connection between these discounts and smuggling.

While Ogra holds ultimate responsibility and authority for import approvals, the OCAC urged the regulator to prioritize the survival of the local oil industry. It emphasized that any OMC refusing to uplift products from refineries and imposing unreasonable commercial terms should not be accommodated through additional imports. Notably, PSO has cancelled approximately 450KT of HSD imports since January 2024 to support refineries during a period of low demand.

The OCAC further recommended that no imports from non-Kuwait Petroleum Corporation (KPC) sources be permitted. Any OMC seeking to import HSD should be required to coordinate with refineries and honour past upliftment commitments.

The disregard for actual national demand is harming the local industry and fostering unfair practices, exerting undue pressure on Pakistan’s foreign exchange reserves. The OCAC expressed deep concern over the situation, which they believe promotes unfair competition and negatively impacts the industry, urging OGRA to investigate thoroughly and take necessary actions to protect legitimate businesses in Pakistan.