ISLAMABAD: The Oil Marketing Companies Advisory Council (OCAC) has urged Chief Minister, Sindh, Murad Ali Shah to direct FBR and Customs to allow clearance of all POL cargoes without bank guarantees or IDC inclusion, ensuring uninterrupted fuel supplies across the country.
In a letter addressed to Chief Minister and copies of which has also been sent to Minister for Petroleum, Secretary Petroleum, Secretary, Excise, Taxation and Narcotics Control Department, Government of Sindh and PS to Prime Minister Chairman OGRA Secretary General OCAC, Syed Nazir Abbas Zaidi has stated that the Governments of Sindh and Balochistan have imposed the Sindh Infrastructure Development Cess (IDC) on POL imports since 1994. The levy was challenged before the Sindh High Court (SHC), which initially granted a stay but later upheld the chargeability of IDC in 2021. The industry appealed before the Supreme Court (SC), which suspended the SHC order but directed that the practice of submitting bank guarantees continue. The oil industry, in line with past practice, did not submit bank guarantees, which was allowed by the relevant authorities to ensure continuity of Oil Supply Chain.
In July 2023, the Sindh Excise & Taxation Department again restored the requirement of submitting 100% bank guarantees at the time of Goods Declaration. Following interventions by MEPD and OGRA, an interim arrangement was reached allowing submission of undertakings instead of bank guarantees. While the matter remains sub judice before the Supreme Court (Sindh) and the Baluchistan High Court – the Sindh Government has recently reinstated the requirement of 100% Bank Guarantees for IDC at the time of Goods Declaration.
MEPD has repeatedly emphasized to the provincial governments that petroleum pricing is a federal domain. Accordingly, Punjab and KP Governments have exempted petroleum products from IDC under their respective laws.
The imposition of SIDC poses severe financial and operational risks to the downstream industry.
The submission of bank guarantees worth billions of rupees per cargo – (a single 50,000 MT
vessel costs about USD 40 million) – is unsustainable given the industry’s limited credit lines and thin margins. The imposition of IDC @ 1.8% adds over PKR 3/-litre to product cost, which will ultimately burden the general public – as the price of petroleum products is regulated.
Moreover, POL cargoes that have discharged and those currently under discharge at the ports
require immediate customs clearance. It has been learnt that PSO’s cargo MT Al-Salam II which
discharged HSD at FOTCO is awaiting customs clearance along with HPL’s MS vessel MT Hafnia
Australia.
It is worth mentioning that MS stocks at Keamari are depleting and the two MS cargoes that recently discharged at KPT (PGL’s MT UOG Harriett and PSO’s MT Khairpur) need to be urgently cleared from Customs to ensure nationwide POL supply chain continuity. MS cargo of Wafi Energy and Parcos crude cargo having an ETA of 21st October at KPT will also face delays if the issue persists.
“Any disruption at this critical juncture – amidst the ongoing agricultural season – risks a nationwide halt in the POL supply chain, with recovery likely to take over two weeks,” OCAC said urging intervention to direct FBR and Customs to allow clearance of all POL cargoes without bank guarantees or IDC inclusion, ensuring uninterrupted fuel supplies across the country.
OCAC has also requested a policy intervention to incorporate IDC in the pricing of petroleum products and establish a mechanism for recovery of past IDC dues through pricing.
