LAHORE, June 17: Diesel supplies across the country have started dipping as the government and oil marketing companies (OMCs) get entangled in a vicious circle of default, forcing 15 per cent of the petrol pumps to stop selling the product.

According to the Petroleum Dealers’ Association (PDA), the NWFP has become the worst-hit province due to the huge smuggling of diesel to Afghanistan where oil prices are much higher than in Pakistan.

Sources said that some 15 per cent of the petrol stations had already stopped selling diesel because of the supply squeeze and more were going out of operation on a daily basis.

They said up to 50 per cent of the supplies had been hit in the last 15 days and the situation was worsening by the day.

Only the PSO was partially supplying diesel and even its supplies were dwindling fast.

PDA secretary-general Zakir Qureshi said that OMCs had simply stopped supplying diesel to petrol stations, without citing any reason. All petrol station owners pay money in advance.

He said that very few petrol stations were getting supplies even after advance payments. The companies are neither supplying oil nor giving a timeframe for restoring supplies.

Petrol stations are going out of operation on a daily basis and the country could see a crisis if the situation is not retrieved within a few days.

Explaining the situation, an official of the PSO said two factors were responsible for the crisis. Firstly, the government was not releasing petroleum development levy (PDL) to the OMCs, and the companies are defaulting to refineries, which in turn have been defaulting to importers.Thus, there is a crisis-like situation in the entire supply chain of oil. The government owes Rs65 billion to the PSO alone.There are three other big companies, Total, Caltex and Shell, which have also put the government on notice.

The multinational oil companies have also stopped selling diesel because it inflates the government default and puts these companies under increasing debt to their refineries.

The PSO is somehow managing diesel supplies but it may also not be able to sustain its operation if the government does not move in quickly to correct the situation.

He said that even the PSO had started rationing its stations.

The other reason is Iranian decision to put its border area with Pakistan and Afghanistan on oil quota and make border monitoring more stringent.

Smuggled oil from Afghanistan and Iran used to meet 30 to 35 per cent of oil demand in the country, especially bordering areas.

The Iranian decision has suddenly increased demand in the country, which has put extra pressure on refineries.

These refineries are finding it hard to refine such a huge quantity. They not only have to cope with additional domestic demand but have to supply it to Afghanistan also, which is equally badly hit by the Iranian decision.

That also explains where up-country is feeling the extra crunch because the major portion of supplies is being smuggled to Afghanistan.

Mr Qureshi said panic buying had also contributed to the situation. As the word about shortages spreads, dealers start building their stocks and people filling tanks of their vehicles. It only accentuates the situation.