KARACHI, Feb 25: The share of smuggled and fake/illegal lubricants in the industrial and automotive segments is slightly gaining momentum because of tremendous growth in the local automobile production , rising trend in arrival of used and imported cars, growth in the large scale manufacturing sector and also because of the cheap price factor.

The market share of smuggled lubricant now stands at 40,000 tons followed by 35,000 tons of imported and 50,000 tons per annum of fake lubricants. A total of 200,000 tons of lubricants is being produced by the local producers in the total annual market demand of 325,000 tons.

As the locally produced lubricants' prices are moving up, smuggled and fake lubricants are gaining popularity bit by bit due to price difference as compared to locally produced lubricants.

Smuggled lubricants are cheaper by 40 per cent then locally produced lubricants, while fake lubricants are selling at 40 per cent lower the price of local lubricants. However, the prices of imported lubricants are higher by 10 per cent as against locally produced vehicle engine oil.

Imported lubricants have a small share in the Pakistani markets (10 per cent) and hence they do not have a significant role in the market. However, local producers are finding it difficult to survive in the presence of smuggled, illegal and fake lubricants.

Most of the smuggled lubricants are arriving from Iranian border via Balochistan and secondly from the Afghan Transit Trade. Some of the smuggled lubricants available in Pakistani markets are named as Momen, Super, Hilux, Welcome, etc., while Falcon, ZIC, Sharlu and Fuchs are some of the imported lubricants selling in the markets.

There are 50 factories in the country duly sanctioned/registered by the Ministry of Petroleum and Natural Resources which is the only competent authority under the Pakistan Petroleum Refining and Marketing Rules 1971 amended to date.

There are also dozens of illegal producers who hold L-1 licence from Central Excise and Sales Tax department but do not have approval from Ministry of Petroleum hence they are doing business illegally by exploitation of legal lacunae.

Chairman of All Pakistan Lubricants Manufacturers Association (APLMA), Mian Zahid Hussain said that he had apprised the chairman Central Board of Revenue (CBR), Abdullah Yousuf earlier this month in Islamabad about the market situation and he had assured that he would take steps.

"The share of smuggled and fake lubricants is gaining by four to five per cent per annum which is definitely alarming in the long run," he said.

He said that the association members had also discussed the problem of national industry with the Governor Sindh, Dr Ishratul Ibad on Friday who had assured to take up the problems with the prime minister and the chairman CBR. APLMA chairman said the lubricant industry is contributing Rs5 billion every year under the heads of various taxes and duties to the government.

The basic raw material used in lubricants manufacturing is Lube Base Oil (LBO), produced by the sole public sector unit i.e. National Refinery Limited (NRL), having a maximum LBO production capacity at 190,000 tons per annum. As such the deficit is being met by the imports.

It is estimated that regular imports are around 30,000 to 40,000 tons whereas the rest 95,000 tons is met from the smuggling via Iranian border, misuse of Afghan Transit Trade, fake lubricants in shape of carbon oil, light diesel oil and synthetic rubber contraption.

He said this situation is a threat to the local producers besides depriving the government from federal taxes ranging between 25-30 per cent. On the other hand fake lubricants are injurious to the precious automotive and industrial machinery.

The situation, he said, could be improved through better vigilance by the relevant custom/civil authorities but more so by abolishing 25 per cent customs duty on the imports of LBO so that the local industry could compete with the cheaper smuggled and fake lubricants by removing economic attraction in these illegal products in the market.

Mian Zahid said that in the UAE, there is no Lube Refinery. The lube industry in UAE imports lube base oils from international market, blends and exports its finished lubricants to around 60 countries hence they earn revenue and employment etc.

He said in Pakistan if Custom duty from the import of LBO is abolished the same practice can be exercised here, and we can not only fill the gap of supply and demand in the local market but can also export our finished lubricants in the international market, hence can earn foreign exchange as well as provide tremendous business opportunities to our vending industry.

Besides, the local lubricant makers are also competing with companies like Shell and Caltex by maintaining a good quality standards and low prices. He said he does not see any room for more players to come in the markets.

He said the companies had not yet explored international markets for exports of finished lubricants and on the contrary the local market is facing too many difficulties on account of smuggling, shortage of raw material i.e. LBO due to imposition of customs duty, fake and cheaper sub-standard lubricants supplied by L-1 license holders.