A nationwide fuel shortage looms as oil shipments are held up by a tax dispute

• Oil cargoes remain stranded at Karachi ports.
• Five large petrol and diesel vessels are awaiting clearance.
• Sindh restores 100% IDC bank guarantee requirement.
  

Pakistan faces the risk of nationwide fuel shortages as many oil cargoes remain stuck at ports following the Sindh government’s decision to reinstate the 100% bank guarantee requirement under the Sindh Infrastructure Development Certificate (IDC).

The oil industry has warned that the move could disrupt the country’s fuel supply chain within days if the issue is not resolved promptly, The News reported on Tuesday.

The Oil Companies Advisory Council (OCAC), in its letter on Monday to the Sindh chief minister and federal authorities, said at least five large oil shipments, including vessels carrying petrol and diesel for PSO, HPL, PGL and Parco, are currently awaiting customs clearance at Karachi ports.

With stocks of Motor Spirit (petrol) in Keamari running out fast, the industry has warned of severe disruption nationwide, particularly during the current farming season, if immediate action is not taken.

“The oil supply chain is on the brink of collapse. Recovery could take over two weeks if cargoes are not cleared now,” OCAC added. The controversy centered on the 1.8% IDC imposed by the Sindh and Balochistan governments on POL imports. While the Supreme Court is still hearing the case, Sindh’s Excise Department has suddenly withdrawn a temporary deal, previously allowing businesses in lieu of bank guarantees, and is now demanding billions of rupees in guarantees per ship, a financial burden the industry says it simply cannot afford.

With regulated pricing, tight credit lines and thin profit margins, OCAC estimates that IDC adds over Rs 3 per liter to the cost of fuel, a burden that cannot be passed on to consumers under current pricing mechanisms.

The board urges the Federal Board of Revenue (FBR) and Pakistan Customs to immediately clear all oil cargoes without bank guarantees and calls for a decision at the policy level, including i) formal recognition that oil pricing is a federal matter; ii) inclusion of IDC in fuel pricing mechanisms and iii) a framework for recovery of past IDC dues.

OCAC also pointed out that Punjab and Khyber Pakhtunkhwa have already exempted POL products from the IDC, aligning with the federal jurisdiction for petroleum pricing.

Unless swift action is taken, Pakistan may face a drought at petrol stations, disruptions in transport and logistics and severe delays in the agricultural sector, which could cause wider economic consequences, the council added.