The Economic Coordination Committee (ECC) has approved a policy allowing foreign suppliers to import petroleum products into Pakistan and store them at customs-bonded facilities, a move aimed at strengthening the country’s energy security and ensuring a more resilient fuel supply chain.
The guidelines, which have been pending since June 2023, will take effect after formal ratification by the federal cabinet. The ECC meeting was chaired by Finance Minister Muhammad Aurangzeb.
Under the policy, foreign suppliers will be permitted to import crude oil, petrol, high-speed diesel (HSD), jet fuel, furnace oil, LPG and LNG through customs-bonded storage facilities in Pakistan. All imported products will have to meet specifications approved by the Oil and Gas Regulatory Authority (Ogra).
The initiative is intended to promote strategic petroleum reserves, increase storage capacity and reduce vulnerabilities in the country’s fuel supply chain, particularly in the wake of recent disruptions affecting key regional waterways.
The policy will allow foreign suppliers to maintain bonded stocks at approved private and public storage terminals, including facilities at Port Qasim, KPT/Keamari, Hub and Gwadar, as well as other designated locations such as Mahmood Kot and Machike in Sheikhupura.
Foreign suppliers will also be able to transport bonded petroleum stocks from port-based terminals to inland storage facilities through the national petroleum pipeline network. Such movements will not attract customs duties or taxes, although the required goods declarations will have to be filed.
The new framework will operate alongside the existing import system for licensed oil marketing companies (OMCs) and refineries. Their current import rights and procedures will remain unchanged.
Foreign suppliers may establish dedicated storage infrastructure or use existing public and private bonded warehouses, subject to approval under the Customs Act, 1969 and requirements imposed by relevant port and regulatory authorities. Storage facilities will have to obtain the necessary customs licences.
The policy also provides tax concessions to keep foreign suppliers and their consignees tax-neutral in Pakistan in relation to bonded storage, blending, trading and re-export activities.
For domestic sales, OMCs and refineries purchasing petroleum products from bonded storage will be responsible for all applicable sales tax requirements. They will file the ex-bond goods declaration, submit the Electronic Import Form through their designated banks and pay customs duty, sales tax and other charges applicable at the time of clearance.
Foreign suppliers and consignees will not be required to register under the Sales Tax Act solely for conducting domestic sales under the bonded-storage arrangement.
Foreign suppliers will retain the flexibility to negotiate prices with local OMCs and refineries. Ogra-regulated prices will apply to the onward sale of petroleum products in Pakistan by local purchasers, while foreign suppliers will remain free to re-export bonded stocks at commercially negotiated prices.
The customs value for calculating duties and taxes will be based on the transaction value at the time the bonded goods are sold to a local purchaser.
The policy also gives the government the right to requisition bonded petroleum stocks during a formally declared emergency, including war, armed conflict, a major natural disaster or a complete and documented collapse of domestic supplies.
However, the emergency provision will not apply to routine fuel shortages, price fluctuations or geopolitical developments that do not result in supply disruptions.
In the event of requisitioning, the government will compensate the consignee at the prevailing international market price, based on the weekly average Platts assessment for the relevant product and delivery point. Payment will be made in foreign currency within 15 days of delivery.
The government will have to issue a formal requisition notice specifying the required volume, product and delivery point, while the requisitioned stocks must be purchased and removed within 14 days.
Under the framework, consignees will also be required to report their bonded petroleum inventories to Ogra on a daily basis. The information will be provided by product grade and storage location and maintained in a central regulatory database accessible to relevant authorities.
The Federal Board of Revenue (FBR) had raised concerns over the proposed system, particularly regarding revenue collection and monitoring. However, most other stakeholders supported the initiative, including the proposal to engage major petroleum suppliers in the Middle East.
The government expects the bonded-storage mechanism to enhance fuel security, expand petroleum storage capacity and facilitate both domestic supply and re-export of petroleum products through Pakistan.
