Smuggled diesel flooding market, undermining refineries and revenue

ISLAMABAD: The country’s refineries have urged the Oil and Gas Regulatory Authority (OGRA) to take immediate steps to curb the smuggling of petroleum products, warning that the illegal inflow is significantly undermining their performance and threatening the domestic supply chain.
In a letter addressed to the Chairman OGRA, the chief executives of five major refineries referred to a meeting convened by the regulator last week to discuss the issue of low upliftment of locally refined products. During the meeting, the refineries collectively emphasized that instead of curtailing domestic production, all possible measures should be taken to control the increasing cross-border inflow of petroleum products, which is eroding demand for local output.
They cautioned that, if left unchecked, such inflows could rise to levels seen in previous years, adversely impacting refinery throughput, operational sustainability, and the overall energy supply chain.
The refineries have requested OGRA to highlight the potential adverse implications of unregulated cross-border inflows and to recommend appropriate enforcement and monitoring measures to safeguard the integrity of the domestic petroleum market.
According to sources, an estimated 5,000 tons per day of High-Speed Diesel (HSD) is being smuggled into the country against a total national demand of approximately 22,000 tons per day—accounting for nearly 23 percent of consumption.
The government is reportedly losing around Rs80 per litre in petroleum levy and customs duties, translating into an estimated revenue loss of approximately Rs475 million per day.
Industry officials also expressed concern over a statement attributed to the Balochistan government, published in national media in early April 2026, allowing the sale of smuggled Iranian diesel at Rs280 per litre within the province. Analysts had warned at the time that once such sales are formally permitted, it would be nearly impossible to restrict the movement of the product to Balochistan alone.
They also rejected the argument being advanced in some quarters that smuggling should be tolerated to save foreign exchange, terming it “misguided.” According to industry representatives, smuggling transactions are conducted in hard currency through informal channels, offering no relief to the country’s external account.
“What is even more alarming is the suggestion that refineries should reduce diesel production instead of taking effective anti-smuggling measures,” said the CEO of one refinery. “Such an approach would send extremely negative signals to the refining sector.”
He added that under such circumstances, it would be unrealistic to expect refineries to invest billions of dollars in upgradation and capacity expansion when their existing production is already struggling to find buyers due to the unchecked influx of smuggled products.