By Tariq Butt in The News, Dec 29, 2020
ISLAMABAD: Interior Minister Sheikh Rashid Ahmed, who has given one week’s notice to oil smugglers to end the practice or face strict punitive action, has at hand a well-documented inquiry report to base his action on. The report has concluded that in just one year, the national exchequer suffered a whopping loss of over Rs240 bn due to this illegal activity.
“This is an important political decision and I have been tasked by the prime minister to ensure that the sale of smuggled petrol across Pakistan comes to an immediate end,” he said, after attending a meeting chaired by the premier that discussed anti-smuggling measures, specifically focusing on oil smuggling.
While the week’s time given by the interior minister expires after two days on Dec 30, there is no serious or visible step that has been taken to achieve this objective. The inquiry commission report on the shortage of petroleum products in Pakistan, formed by the prime minister, contains a full chapter that deals with the smuggling of petrol (MD) and high speed diesel (HSD) in Pakistan. It calculated the loss to the public kitty on the basis of the figures provided by the Federal Board of Revenue (FBR) and the Ministry of Energy, petroleum division. It said smuggling in general is a phenomenon that has afflicted Pakistan’s economy for a long time. The petroleum sector is no exception to this common malaise. Rather, the loss of revenue due to petroleum smuggling in Pakistan is staggering. It is an open secret that petroleum products, especially MS and HSD, are being smuggled into Pakistan from Iran via the western border at Taftan.
However, the commission said in its report that it could not proceed on hearsay alone. To reasonably quantify the extent of smuggling, tangible evidence was required. It said that on top of the secret probe, figures of seized quantities of MS and HSD were obtained from the FBR for the financial year 2019-20.
The report said that during this period, the quantity of seized petrol amounted to 27,911,746 litres of petrol and 995,037,484 litres of HSD. To quantify this in revenue terms, the total petroleum levy (PL), general sales tax (GST) and varying customs duty over the year were taken into account.
The average PL and GST on petrol was Rs33.27 per litre while it was Rs37.52 per litre on HSD. Thus, the commission calculated that the net loss of revenue on the seized MS and HSD was Rs48bn.
The report said that after having interviewed many people in the business including the customs authorities, the commission is of the considered opinion that the seized quantity is only 20% of the actual smuggled amount. During the fact-finding process, the commission made use of many sources which supplied information on condition of non-attribution. If one takes this figure of 20 percent to be correct, then the actual loss to the exchequer would be Rs240,059,924,475 in one financial year.
The findings said another way to assess the quantum of smuggling is to look at the unusual consumption rise in the month of June 2020. Taking other variables as constant and given the fact that the Iran border was tightly shut due to the Covid-19 pandemic, the increased amount in consumption could be attributed to the quantity of smuggled HSD and MS. Nothing extraordinary happened this year that was not happening during the year 2019. Rather, due to Covid-19, economic activity was slow compared to the previous year. Thus, the report said, the unusual increase could be attributed to the stoppage of smuggling as the same quantity was not being consumed legitimately and hence reflected in the official figures.
The report noted that the total net increase in June 2020 in consumption came to 117,005MTs or 159,009,795 litres of MS and 289,099MTs or 345,444,395 litres of HSD. The quantification of these figures factoring in all taxes (PL, GST, customs duty etc.) comes to an amount of Rs265bn.
The commission said another avenue that has gained significance is smuggling of petroleum products by sea. In this regard, an oil company is reportedly involved in this nefarious business. Since it has its own refinery in Hub, a relatively remote and secluded place, there is hardly any check on its imports and what gets smuggled in. This is substantiated by the fact that the company does not have a pier and berth at the refinery. Rather, it uses another method of decanting ships called single point mooring. In this method, a platform has been established nearly 18km in the open sea and the floating platform gets connected to the anchored ship in the open sea. The decanting is done through a submerged pipeline extended on the seabed from the refinery to the floating platform.
The findings said the penetration of smuggled HSD is widespread across Punjab, Sindh and Balochistan. Smuggling can be curtailed significantly if such filling stations are reprimanded for their illegal sale and purchase of smuggled petroleum products through penalties and the cancellation of their licenses, among other measures.
https://www.thenews.com.pk/print/766150-sh-rashid-s-pledge-to-end-oil-smuggling-yet-to-materialise
