Fuel supply at risk as Sindh cess delays oil clearance at Karachi Port

The enforcement of the Sindh Infrastructure Development Cess has delayed the clearance of petroleum products at Karachi Port, raising concerns about a possible nationwide fuel shortage, the Oil Companies Advisory Council (OCAC) warned on Friday.

In an urgent letter to the Sindh chief minister, the OCAC said petroleum cargoes being discharged and vessels anchored at ports required immediate customs clearance to maintain the fuel supply chain across the country.

According to the letter, Pakistan State Oil’s (PSO) oil tankers MT Islam 2 and MT Hanifa are awaiting customs clearance, while oil reserves at the Keamari terminal are rapidly depleting. The OCAC cautioned that if upcoming consignments from Wafi Energy and Pak-Arab Refinery (Parco) arriving on October 21 were not cleared promptly, the supply disruption could worsen.

The council warned that enforcing the 1.8% infrastructure cess could increase the cost of petroleum products by more than Rs3 per litre, despite fuel prices being regulated, thereby burdening consumers and heightening operational challenges for the downstream industry.

Highlighting the impact on the ongoing agriculture season, the OCAC stated that any delay could bring fuel distribution to a halt nationwide and that it might take up to two weeks to restore normal supply once the issue is resolved.

The letter, signed by OCAC Chairman Abdul Sami Khan, recalled that the cess on petroleum, oil and lubricant (POL) imports was first imposed by the Sindh and Balochistan governments in 1994. Although the Sindh High Court (SHC) upheld its collection in 2021, the Supreme Court later suspended the SHC order while maintaining bank guarantees under judicial review.

Following interventions by the Ministry of Energy (Petroleum Division) and the Oil and Gas Regulatory Authority (Ogra), an interim arrangement previously allowed undertakings instead of bank guarantees to ensure uninterrupted fuel imports. However, the Sindh government has recently reinstated the requirement for bank guarantees at the time of goods declaration.