The federal government has unveiled a bonded bulk storage policy to end the illegal hoarding and shortages of petroleum products in the country, State Minister for Petroleum Musadik Malik announced on Wednesday.
Mailk said whenever fuel prices were going to be increased, hoarders stored petroleum products to make illegal gains on stocks which led to petrol and diesel shortages.
“Today I am presenting a solution to end the practice of hoarding,” he announced in a press conference in Lahore.
He said that bonded storage policy will ensure smooth supply of petroleum products and end the practice of illegal hoarding.
“Now the world’s biggest traders will not be able to [illegally] hoard oil in the country,” he remarked.
Under the policy, he explained, the foreign companies doing legal business of oil from around the world could construct bonded warehouse for oil storage in various major cities and it would not only bring in foreign exchange reserves to Pakistan but also ensure all the availability of petrol and diesel in the country.
It would also break the monopoly of a few oil marketing companies, which used to create artificial shortage of oil in the country on various pretext, and also discourage illegal hoarding of oil to gain more profits, he added.
The minister said the government was taking appropriate and comprehensive measures to maintain or gradually lower the prices of energy including petroleum, gas and electricity.
Malik added that foreign companies which stored petroleum and diesel in the bonded warehouse, would definitely get themselves registered here in Pakistan and would have to open their business accounts in the local commercial banks.
Consequently, it would resolve the issue of LCs (letters of credit) confirmation as these companies would make business transactions in dollar or in rupee directly through banks and in a way, it would also release the pressure on country’s foreign reserves exchange and create a little bit space for the government in making various payments, he said.
He further said that this initiative would also do away with LCs charges, which so far were being passed on to the end consumer.
The state minister asserted that it would be a great relief and facilitation for the small filling stations which faced even more problems during shortage of oil, and now they would be able to continue their business after buying oil from the bonded warehouses.
His statement comes as the Economic Coordination Committee (ECC) of the cabinet approved “Bonded Bulk Storage Policy 2023” for petroleum products, Finance Minister Ishaq Dar said on Wednesday.
Taking to Twitter, the finance minister said the federal government fulfilled another commitment with people of Pakistan that it made in the budget speech for the fiscal year 2023-24 on June 9 in National Assembly.
What is bonded storage policy?
Under the policy, the foreign suppliers will be allowed to procure crude and POL products from the international market and store them in bonded bulk storages in Pakistan ports.
A senior official from the Petroleum Division explained to The News that if Pakistan needs to procure crude or finished oil products from foreign suppliers, the country’s customs department will de-bond the stored products. This is how the oil products will be formally imported to Pakistan.
However, the policy, he said, will allow foreign suppliers to export the bonded products. If foreign suppliers use the country’s storage, they will pay for it. However, the products stored in the bonded bulk storage will not be considered imported products unless these products are de-bonded by the customs department.
This policy will help reduce the LCs and freight charges to a reasonable level and maintain the oil supply chain all the time in the country as in the past, the supply chain got disturbed. This policy will also help foreign suppliers build bonded bulk storages in Pakistan ports. The relevant officials said that the Port of Fujairah was developed initially by allowing foreign oil supplies to store their oil supplies in bonded storages. Then foreign fuel suppliers started developing the bonded storage at Fujairah port and this is how the said port was developed.
— With additional input from APP