In a move that underscores the mounting tensions between provincial taxation, industry viability and national fuel‐supply security, the Petroleum Division of Pakistan has initiated the establishment of a dedicated monitoring cell tasked with overseeing the supply of petroleum products (commonly referred to as “POL” — petrol, diesel and other fuels) across the country. The development comes at a time when the imposition and enforcement of the Sindh Infrastructure Development Cess (SIDC) by the provincial government of Sindh has triggered strong industry objections and serious concerns about fuel‑supply disruptions.
Background: The Sindh 1.85% Cess, Industry Pushback & Supply Risk
The issue centres on Sindh’s decision to levy the SIDC at a rate of 1.85 per cent on petroleum products being imported or moved through ports in the province. Industry associations, particularly the Oil Marketing Association of Pakistan (OMAP) and the Oil Companies Advisory Council (OCAC), have strongly protested, arguing that the levy has been introduced without being incorporated into the regulated pricing mechanism administered by the Oil & Gas Regulatory Authority (OGRA). According to OMAP, this adds an effective burden of roughly Rs 2.5‑3 per litre to fuel costs, endangering already thin margins for oil‐marketing companies (OMCs). Business Recorder+2Profit by Pakistan Today+2
Meanwhile, the Sindh government has demanded that petroleum importers furnish bank guarantees in respect of the cess, instead of relying on the previous system of simple undertakings. The letter dated 15 October 2025 from the Sindh excise, taxation and narcotics control department to the Secretary of the Petroleum Division spells this out, cautioning of legal consequences if the change is not enforced. Daily Times+1
These developments have raised alarms within the industry that:
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import consignments may be delayed or blocked because of the requirement of bank guarantees; The News International+1
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the additional cost from the SIDC, not reflected in the notified fuel price, may squeeze OMC margins and compel operational disruption; Profit by Pakistan Today
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such delays and cost pressures may translate into actual supply shortages at retail fuel outlets and risk of national‐scale disruption. Pakistan Point+1
The Monitoring Cell: Objectives, Mandate & Immediate Context
Against this backdrop, the Petroleum Division has reportedly set up a monitoring cell — situated in the DG (Oil) office — to track the flow of petroleum products, ensure that OMCs maintain adequate stock at depots and retail outlets, coordinate transporter/tanker movements, and interface with provincial/port/clearance authorities to head off potential supply bottlenecks. Daily Pakistan English News+1
The timing of this formation is significant: it coincides with multiple stress‑points in the supply chain (including provincial imposition of bank guarantees, port‑clearance hold‐ups, and industry protests) and serves as a ‘pre‐emptive’ mechanism by the federal government to monitor risks to fuel availability.
Key tasks of the cell include:
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Monitoring stocks of key petroleum products at depots and retail outlets.
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Ensuring movement of tankers is authorised and not impeded by province‑specific measures (e.g., port clearance, bank guarantee demands).
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Liaising with OMCs, refineries, port/clearance/customs authorities and provincial governments to detect early signs of supply chain disruption.
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Reporting regularly to higher levels (including the Petroleum Division, OGRA, and potentially the Prime Minister’s Office) on supply status, risk triggers and proposed remedial action.
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Acting as a coordination hub in case of strike‑threats, port delays or government policy changes (the cell was earlier reported in response to a petrol‑pump dealers’ strike). The News International+1
By establishing such a cell, the federal government is signalling that it takes potential supply disruptions seriously and is prepared to monitor fuel logistics dynamically rather than relying solely on the regulated pricing mechanism.
Why This Matters: Supply Chain, Prices & Industry Viability
This dual phenomenon of a provincial tax/cess dispute and creation of a federal monitoring cell matters for several overlapping reasons:
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Supply chain vulnerability: Petroleum imports typically arrive at ports (notably Karachi and Port Qasim), are cleared via customs & excise, moved to depots, and then distributed via tankers to retail stations. Any impediment — be it delays in port clearance due to new bank‑guarantee demands, or reluctance of OMCs to offload cargoes under unclear cost burdens — can create localised shortages that rapidly propagate. As one industry alert warns: “It may take two weeks to restore normal operations.” The News International+1
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Price stability and regulated environment: In Pakistan, retail petrol and diesel prices are subject to government‑notified formulas (via OGRA) that include import, transportation, margins and taxes/levies. When a provincial levy (the SIDC) is introduced but not absorbed into that formula, industry argues that margins are squeezed and the cost is either absorbed (operational stress) or passed on (price increase). In either case, the regulated price architecture is challenged. Business Recorder
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Industry financial stress: OMCs are already working on thin margins, with high import costs, exchange‐rate risk, bank financing costs, working‐capital constraints and regulatory compliance burdens. The additional uncertainty of new bank guarantees and a new tax burden threatens operational viability. Daily Times+1
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Federal–provincial coordination & national interest: Fuel supply is by nature a national concern. While provinces have the right to levy taxes like the SIDC, the lack of a harmonised mechanism — especially when supply passes through a province — creates friction between the province’s tax prerogative and the federation’s obligation to ensure uninterrupted fuel for the country. The creation of the monitoring cell can be seen as a federal attempt to safeguard national supply in the face of provincial policy uncertainties.
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Risk of broader fallout: If fuel is delayed or stock falls low at retail outlets, the social and economic consequences can be large: transport sector disruption, inflationary pressures, industrial shutdowns, and public unrest. Establishing a monitoring cell mitigates these risks by providing early warning and coordinated action.
Challenges & What to Watch
While the monitoring cell is a positive step towards oversight, several challenges remain:
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Effective enforcement: Monitoring is only helpful if bottlenecks are resolved. For example, if import clearance is blocked by bank‐guarantee demands, monitoring won’t by itself clear the cargo. The federal government and the Sindh province will need to coordinate resolution mechanisms.
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Data transparency and real‑time tracking: For the cell to function, accurate, real‐time data is needed from depots, tankers, retail outlets and import terminals. India’s experience shows that that requires IT systems, tracking tankers, and integration across stakeholders. Pakistan is already moving towards digital tracking of petroleum products under the Petroleum (Amendment) Act, 2025. Pakistan Today+1
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Clarification of responsibilities: With federal, provincial and industry stakeholders all involved, lines of responsibility must be clear: who authorises tanker movement? Who clears consignments at ports? Who absorbs the cost of the cess/tax? Without clarity, monitoring may flag issues but resolution may stall.
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Balancing margins and price implications: If the cess burden is real, OMCs may raise the risk of passing cost to consumers or reducing supply/stock because of margins squeezed. The monitoring cell must be able to highlight not just stock levels but also financial health of supply entities.
Conclusion
The formation of a POL‐supply monitoring cell by the Petroleum Division comes at a critical juncture: the intersection of provincial tax policy (the SIDC in Sindh), national fuel‑supply security, and the regulated pricing architecture. It reflects recognition by the federal government that fuel supply cannot be left to mechanics alone — it needs oversight, coordination and early warning.
At the same time, the catalyst for this action — the imposition of the 1.85 per cent infrastructure‑cess in Sindh, bank‑guarantee demands for import clearance, industry protests and threat of supply disruption — highlight how policy fragmentation (between province and centre) can create systemic risk in essential service delivery.
The monitoring cell’s success will depend on the underlying resolution of the policy fault‑line: i.e., how the SIDC is integrated into pricing, how import clearance protocols are managed, and how industry viability is maintained. If those are not addressed, the monitoring cell may only catch warning lights rather than avert the disruption.
In short: monitoring is necessary—but it must be matched by policy clarity, coordination and timely intervention to safeguard Pakistan’s fuel supply chain.