ISLAMABAD – Pakistan’s economy is suffering massive losses due to the unchecked smuggling of the Iranian High-Speed Diesel (HSD), with industry estimates suggesting that nearly 5,000 tons of smuggled diesel are entering the country daily — accounting for almost 23 percent of the national diesel demand of around 22,000 tons per day.
Officials in the petroleum sector and the provincial authorities have voiced growing concerns over the alarming scale of the illegal trade, warning that the situation is undermining legitimate businesses, damaging investor confidence, and causing huge losses to the national exchequer.
According to the estimates and the officials familiar with the matter, the federal government is losing nearly Rs 475 million every day in petroleum levy and customs duties because of the smuggled fuel market. Sources said the loss is calculated on an estimated Rs. 80 per litre in unpaid taxes and levies on illegally imported diesel.
Senior officials in the energy sector have described the situation as “economically unsustainable,” saying the unchecked inflow of smuggled petroleum products has severely disrupted the domestic fuel market and adversely affected local refineries already operating under financial stress.
The issue gained further attention after a statement attributed to the Balochistan government surfaced in national media during the first week of April 2026, indicating permission for the sale of the Iranian diesel at Rs280 per litre within the province.
The provincial government sources defended the move by arguing that cheaper fuel was being made available to residents in border areas where Iranian diesel has historically been traded through informal channels. However, petroleum sector experts and federal officials questioned the practicality of restricting the movement of such fuel within provincial boundaries once its sale is officially allowed.
“Once smuggled diesel enters the mainstream market in Balochistan, it becomes virtually impossible to stop its transportation to other parts of the country,” a senior petroleum ministry official said on condition of anonymity.
Energy experts also rejected arguments advanced by some quarters that smuggling should be tolerated to save foreign exchange reserves. Officials pointed out that smuggling transactions are conducted through unofficial channels in hard currency, offering no real benefit to the formal economy.
“Illegal fuel trade neither supports the documented economy nor helps the country’s foreign exchange position. Instead, it strengthens undocumented financial networks while depriving the state of vital revenue,” an energy analyst observed.
The industry stakeholders expressed even greater concern over reports that authorities are considering asking local refineries to reduce diesel production because of declining demand caused by smuggled products.
Refinery officials warned that such measures could send extremely negative signals to investors at a time when Pakistan is seeking billions of dollars in investment for refinery upgradation and modernization projects under long-delayed energy sector reforms.
“How can refineries be expected to invest heavily in upgrading facilities and enhancing production capacity when their existing output is struggling to find buyers because of rampant smuggling?” questioned a senior refinery executive.
Officials said the continued influx of illegal fuel not only threatens the viability of domestic refineries but could also compromise Pakistan’s long-term energy security by discouraging future investment in the downstream petroleum sector.
Policy experts have urged the federal and provincial governments to launch coordinated anti-smuggling operations, strengthen border monitoring, and ensure strict enforcement of petroleum laws to protect legitimate businesses and safeguard national revenues. They stressed that without decisive action, the illegal diesel trade could further destabilize the formal energy market and deepen fiscal losses already confronting the country’s fragile economy.
