EDITORIAL: The protracted standoff between the Sindh government and the country’s oil marketing companies (OMCs) over the Sindh Infrastructure Development Cess (SIDC) risks escalating into a full-blown crisis that could disrupt the country’s fuel supply chain in the days ahead if not swiftly resolved for good. In recent days, clearance of imported petroleum consignments at Sindh’s ports have been delayed, as the provincial government presses OMCs to furnish bank guarantees against their SIDC liabilities, a demand the companies continue to contest.
It is important here to step back and understand how this dispute took shape. The cess, first introduced through the Sindh Finance Act of 1994 and later consolidated under the Sindh Development and Maintenance of Infrastructure Cess Act 2017, was framed as a response to the province’s unique logistical burden. With its ports handling most of Pakistan’s imports — from fuel to bulk commodities — the province had long argued that its roads, bridges and transport networks bear the brunt of the country’s trade traffic.
The levy was therefore intended to create a dedicated funding stream for maintaining and upgrading this infrastructure, which endures constant strain from heavy cargo movement, even as customs and port revenues flow primarily to the federal exchequer.
While the cess, levied at around 1.8-1.85 percent on fuel transport, was conceived as a tool for infrastructure development, its enforcement became a major point of contention between the province and the oil industry. Back in 2021, OMCs secured a stay order from the Sindh High Court on the imposition of the levy, which was later vacated, with both the high court and later the Supreme Court directing them to pay the cess. Yet implementation of the court’s decision has remained stalled since 2023.
The Sindh government is now demanding bank guarantees amounting to Rs180 billion in arrears dating back to 2021 to ensure compliance with the Supreme Court’s order, warning that consignments won’t be released otherwise. As is clear, this could disrupt the national fuel supply chain and cause potential fuel shortages.
What must be considered here though is that the crisis stems from how Pakistan’s fuel pricing regime is structured. As pointed out by the Oil Marketing Association of Pakistan (OMAP) in a recent letter to the petroleum secretary, the country’s OMCs function within a tightly regulated framework, where product prices, margins and cost components are all dictated by a formula prescribed by the federal government. This means that OMCs have no room for independent adjustment of prices. In such an environment, expecting them to absorb the cost of the cess would translate into an additional burden of approximately Rs2.5-3 per litre, according to OMAP figures, a blow that could substantially erode the sector’s already narrow margins and imperil its financial viability.
It goes without saying then that it is now incumbent upon the federal government to intervene and help resolve this impasse. Since it determines the pricing mechanism under which OMCs operate, it must offer a solution that does not impose disproportionate financial strain on the sector. This could mean revisiting the existing pricing formula or accelerating long-discussed moves toward deregulation to allow cost adjustments in exceptional circumstances. A swift resolution is essential to safeguard the integrity of the country’s fuel supply chain.
At the same time, the Sindh government must also be held accountable for how effectively it has utilised the revenue collected under the SIDC. A Karachi Chamber of Commerce and Industry press release of 2022, for instance, revealed that while Sindh collected Rs80.4 billion in infrastructure cess during FY22, only Rs2.5 billion was allocated for development works. These gaps in spending efficiency deserve as much scrutiny as the dispute over collection of the SIDC itself.
Copyright Business Recorder, 2025
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