ISLAMABAD: The inflow of smuggled petroleum products from Iran into Pakistan has surged again amid heightened regional tensions, raising serious concerns for local refineries and energy sector stakeholders.
Industry sources say the situation has worsened over the past two months, coinciding with disruptions in global energy routes and volatility linked to developments around the Strait of Hormuz. The spike in global oil prices has also increased pressure on Pakistan’s import bill and domestic fuel market.
Pakistan’s weekly oil import cost has reportedly jumped from around $300 million to nearly $800 million, further straining external accounts.
According to sources, major refineries including Pak-Arab Refinery (PARCO), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), and Attock Refinery Limited (ARL) have jointly raised concerns with the Oil and Gas Regulatory Authority (OGRA). In their communication, they warned that unchecked cross-border inflows of Iranian petroleum products are undermining demand for locally refined fuels and threatening refinery operations.
The refineries cautioned that if the situation persists, smuggled fuel volumes could once again reach levels seen in previous years, significantly impacting refinery throughput, operational sustainability, and the broader domestic supply chain.
They urged OGRA to highlight the risks of unregulated inflows and recommend stronger enforcement and monitoring measures to protect the local petroleum industry.
Reports indicate that Iranian diesel and petrol continue to enter Pakistan through remote routes in the Makran and Rakhshan divisions, later reaching markets in Sindh and southern Punjab, where they are sold at unauthorized roadside outlets.
The estimated scale of smuggling remains substantial, with up to 2.8 billion litres annually, resulting in an estimated revenue loss of around Rs227 billion to the national exchequer. At peak levels in 2023, inflows were estimated at over 10 million litres per day before declining to around 5–5.3 million litres daily following enforcement actions.
Current estimates suggest nearly 5,000 tons of high-speed diesel are being smuggled daily, accounting for a significant share of domestic consumption and causing major revenue losses through evaded petroleum levy and customs duties.
Industry stakeholders also recalled earlier enforcement crackdowns in which intelligence agencies uncovered large-scale smuggling networks involving hundreds of fuel stations, officials, and traffickers.
They warned that continued illicit inflows could discourage investment in refinery upgrades and expansion, arguing that domestic producers are already struggling to compete with untaxed and unregulated fuel entering the market.
Meanwhile, officials have floated proposals in some quarters to manage shortages by adjusting local refinery output, a suggestion industry players have criticised as counterproductive, urging instead a stronger crackdown on smuggling networks.
Amid supply pressures, Pakistan has also received oil cargo support from friendly countries, while discussions continue on building strategic petroleum reserves to cushion against future supply shocks.
Story by Zafar Bhutta
