ISLAMABAD: The Sindh government has asked the Petroleum Division to ensure all petroleum-importing companies, including Pakistan State Oil (PSO), submit bank guarantees against the Sindh Infrastructure Development Cess (SIDC); a move that could disrupt national fuel supplies.
The request was conveyed in a letter dated October 15, 2025, from the Sindh Excise, Taxation & Narcotics Control Department (ET&NCD) to the Secretary of Petroleum.
Earlier, the provincial cabinet, in its October 6 meeting, decided that consignments should not be released based on undertakings alone.
The letter says the change is intended to align with a Supreme Court order of September 1, 2021 (CPLA No. 4288 of 2021), and states that previously accepted undertakings should be replaced with bank guarantees.
Sindh frames the request as a compliance measure with the court’s direction, warning that failure to follow the court’s orders could carry legal consequences. The letter has been copied to senior provincial law and tax officials, including the Advocate General of Sindh and the Director General of Excise & Taxation.
However, industry sources warned that enforcing bank guarantees for every shipment, even if implemented via the Petroleum Division at the province’s request, could create major liquidity and operational problems for importers and refineries.
“This is not a minor procedural change asking importers to post multi-billion-rupee guarantees for each cargo will strain working capital and could paralyze imports,” said a senior executive at an OMC.
They added that PSO, already under cash-flow pressure due to delayed government payments, would find such demands especially burdensome.
Industry sources also cautioned that the move could lead to port congestion, delayed cargo clearances, higher demurrage costs and potential nationwide fuel shortages if federal and provincial authorities do not coordinate promptly. Most fuel imports clear through Karachi and Port Qasim, meaning any bottleneck there can ripple across the country’s supply chain.
The SIDC, introduced in 1994 to fund Sindh’s infrastructure, has long been a flashpoint between Sindh and the federation. The federal government has previously raised objections, arguing that customs and import procedures fall under federal jurisdiction and that provincial measures requiring different clearance conditions need intergovernmental settlement.
Sources in the Petroleum Division confirmed receipt of the Sindh letter and said it is being legally reviewed and would consult the Law Division, OGRA and federal stakeholders before acting on the provincial request.
“The matter is highly sensitive,” a source said. “Any unilateral or poorly coordinated implementation could destabilize supply and market stability.”
The industry sources urged that the Sindh and the federal government must resolve the issue through inter-governmental channels to avoid operational disruption. “No one disputes the province’s right to collect SIDC where applicable,” said an industry source, adding, “but converting undertakings into mandatory BGs for every shipment without a workable federal mechanism would be disastrous.”
It is pertinent to note that if the issue is not resolved through timely consultation, it could evolve into a broader policy dispute between Sindh’s drive to enforce its tax mandate and the federal government’s responsibility to maintain uninterrupted fuel supplies, a situation that may test the limits of the country’s energy coordination framework and intergovernmental harmony.
