KARACHI, Aug 15: Smuggling of Iranian petrol is on the decline and the product is losing charm as gap between locally-produced and smuggled petrol has come down to Rs7 as compared to Rs10 to 15 a litre a few months back.

Oil industry sources said the main reason of decline in petrol smuggling was introduction of rationing system by the Iranian government in the last week of June for private cars and taxis aimed at reducing state petrol subsidies.

Besides, security has been beefed up at the Iranian border to stop movement of smuggled goods. Iran is also trimming down its petrol imports to curb massive consumption. Being world’s fourth largest oil producer, it must import 40 per cent of petrol to meet its requirements due to lack of refineries. After introduction of rationing, daily consumption has declined by 20 million litres a day to about 55 million litres a day.

The Iranian government’s decision has almost made entry of smuggled oil products in Pakistan through border a less-profitable business for many operators of illegal pumping stations.

However, the declining trend in petrol smuggling has led to an increase in consumption of locally produced petrol. July sales of petrol stood at 120,000 tons as compared to 100,000 tons in July 2006.

Due to increasing petrol consumption, the Pak-Arab Refinery Limited (Parco) had to cancel an international tender for petrol export in July. Since then the refinery had not issued any fresh export tender.

Parco had exported 75,892 tons of petrol from Oct 31, 2006, to June 30, 2007.

A source in Parco said the refinery would review its export plan for new fiscal year keeping in view the demand and supply situation of petrol as local market comes first.

Petrol had been in surplus for the last one-and-a-half years witnessing a negative growth due to high price and rising demand of CNG in old and new vehicles.

Meanwhile, a local refinery operator said refineries were producing petrol up to their maximum capacity to meet the surging consumption. He also said use of power generators had also created a demand.

On the other hand, use of power generating units has increased phenomenally, especially after the worst power failures this summer. To some extent, it has resulted in giving a boost to petrol sales.

Power generating machines’ import in July-June 2006-2007 went up by 38 per cent to $706 million as compared to $511 million in 2005-2006.

However, a generator importer said out of total generators’ imports, the share of petrol generator is 60 per cent followed by 30 per cent diesel and 10 per cent gas.

He said a majority of consumers, who had purchased petrol generators, had converted them into gas to make them affordable.

A few months back, Iranian petrol had been selling in Baldia, Manghopir, Surjani, Orangi, Lyari, University Road etc at Rs40-45 per litre as its sales had increased because of high petrol price of Rs54 per litre. Now the situation has changed.

Chairman, Pakistan Petroleum Dealers Association (PPDA), Abdul Sami Khan, said as the Iranian government had tightened border security and has introduced rationing of petrol, it has shrunk the price difference of local petrol and smuggled petrol to only Rs7 per litre as compared to Rs 10-15 per litre a few months back.

However, he said floods and rains in Balochistan in the last week of May and June can also be attributed to restricting the free movement of smuggled product from Iran.

By February 2007, the association had identified at least 200 illegal stations selling smuggled petrol in various parts of the city.

The PPDA had also provided pictures of illegal stations to the police, city government and the federal government.

Prior to rationing, the Iranian petroleum products were highly subsidised and that was the main reason that smuggled petrol was being sold illegally in Pakistan through illegal channels. One-and-a-half year back, smuggled Iranian petroleum products were available in abundance in Balochistan and NWFP only, but these products had also been selling openly in Karachi.

“Now some 30-40 illegal stations have been closed and the sale has plunged sharply. The increase in the sale of locally made petrol is enough to prove the declining demand of smuggled petrol,” Sami Khan said.

Illegal station owners used to spend just a few thousand rupees for acquiring NOC/permit from DCO Office or the Explosive Department for storage of oil products and these permits used to be misused for installation of stations/depots. They had full shelter from the police and some government departments.