ISLAMABAD: The government has approved a new policy allowing foreign petroleum suppliers to establish Customs bonded storage facilities in Pakistan at their own expense, enabling them to store imported fuel for both domestic sales and re-export.
The decision, approved by the Economic Coordination Committee (ECC) of the federal cabinet, comes amid concerns over petroleum supply-chain vulnerabilities following disruptions in the Strait of Hormuz. The policy, which requires formal ratification by the federal cabinet, will take effect immediately thereafter.
The ECC, chaired by Finance Minister Muhammad Aurangzeb, approved the Petroleum Division’s proposal titled “Import on Foreign Supplier’s Account through Customs Bonded Storage Facilities.” The guidelines had been pending since June 2023.
According to the government, the initiative is aimed at strengthening Pakistan’s energy security architecture by promoting strategic petroleum reserves, developing bonded storage infrastructure and improving the resilience of the country’s petroleum supply chain.
The policy will cover imports of crude oil, petrol, high-speed diesel, jet fuel, furnace oil, LPG and LNG on foreign suppliers’ accounts through Customs-bonded storage facilities. All imported products will have to comply with specifications approved by the Oil and Gas Regulatory Authority (OGRA).
The arrangement will allow foreign suppliers to maintain bonded inventories at approved private and public storage terminals, including facilities at Port Qasim, KPT/Keamari, Hub and Gwadar, as well as other designated locations such as Mahmood Kot and Machike, Sheikhupura.
Foreign suppliers will also be permitted to move bonded petroleum stocks from port-based facilities to inland storage locations through Pakistan’s national petroleum pipeline network. Such bonded movements will not trigger customs duty or taxes, although the required goods declarations will have to be filed.
For domestic sales, licensed oil marketing companies (OMCs) and refineries will remain responsible for all applicable taxes and duties at the point of ex-bonding. The OMC or refinery purchasing the product will act as the importer of record and will be required to file the relevant ex-bond goods declaration, submit the Electronic Import Form through its designated bank and pay applicable customs duty, sales tax and other charges.
The existing import regime for licensed OMCs and refineries will remain unchanged and operate alongside the new bonded-storage mechanism.
The policy also allows foreign suppliers or their consignees to develop dedicated storage infrastructure or use existing private and public bonded warehouses, subject to approvals under the Customs Act, 1969 and relevant port regulations.
Bonded storage facilities will have to be licensed by Customs after fulfilling the prescribed requirements. However, foreign suppliers and consignees will not be required to register with the Federal Board of Revenue (FBR) under the Sales Tax Act, 1990, as a condition for commencing operations under the scheme.
The government has also provided for tax-neutral treatment of foreign suppliers and consignees in relation to bonded storage, blending, trading and re-export activities.
Under the policy, foreign suppliers will be able to sell bonded products to Pakistani OMCs and refineries at commercially negotiated prices. OGRA-regulated prices will apply to onward domestic sales by local purchasers, but will not restrict the foreign supplier’s pricing arrangements with local buyers or its right to re-export the products.
The customs value for determining applicable duties and taxes will be based on the transaction value prevailing when the bonded product is sold to the local purchaser in Pakistan.
The framework also allows bonded petroleum products to be re-exported without being subject to domestic pricing requirements.
In an emergency, the government will have the authority to requisition bonded petroleum stocks physically available at approved storage locations. However, this provision will only apply following a formally declared emergency, such as war, armed conflict, a major natural disaster or a complete and documented collapse of domestic supply.
Routine energy shortages, price fluctuations and geopolitical developments that do not result in actual supply disruptions will not qualify for emergency requisitioning.
Requisitioned petroleum products will be compensated at the prevailing international market price, based on the weekly average of the relevant Platts price assessment, with payment to be made in foreign currency within 15 calendar days of delivery.
The government will be required to issue a formal requisition notice specifying the product, volume and delivery point, while the requisitioned stocks must be purchased and removed within 14 days. The government will not have the authority to require consignees to maintain additional reserve stocks solely for potential requisition.
The policy also introduces enhanced monitoring requirements. Consignees will be required to report their bonded petroleum inventories to OGRA on a daily basis, with stocks disaggregated by product grade and storage location. The information will be maintained in a central regulatory database accessible to relevant authorities.
The FBR had reportedly raised concerns over collection and monitoring challenges associated with the proposed mechanism. However, other key stakeholders supported the initiative, particularly in view of the need to strengthen petroleum supply chains and engage international suppliers in the Middle East.
The government has also identified several technology and regulatory changes required to operationalise the framework, including modifications to the WeBOC customs system and coordination between the State Bank of Pakistan and FBR to facilitate partial Electronic Import Forms against single in-bond cargo declarations.
The new framework is expected to provide foreign petroleum suppliers with greater flexibility to maintain strategic inventories in Pakistan while giving domestic OMCs and refineries an additional source of supply.
The government hopes the policy will strengthen Pakistan’s petroleum supply chain, encourage investment in storage infrastructure and enhance the country’s ability to manage future disruptions in international energy markets.
Story by Khaleeq Kiani
