By Staff Reporter
ISLAMABAD: The central bank has temporarily permitted imports of crude oil and petroleum products on a cost-insurance-and-freight basis, a move aimed at sidestepping soaring war-risk premiums and freight costs that have paralysed conventional shipping arrangements amid tensions in the Middle East.
The State Bank of Pakistan issued the circular to presidents and chief executive officers of all authorized foreign-exchange dealers on Wednesday night, effective from March 11. The facility will remain in place for exactly 60 days.
“In view of the prevailing situation and the critical importance of crude oil and petroleum products for the country, it has been decided to allow import of crude oil/petroleum products on CIF (cost, insurance and freight) basis for a period of 60 days starting March 11,” the circular said, directing dealers to advise clients immediately and ensure “meticulous compliance.”
Under normal rules spelt out in Chapter 13 of the Foreign Exchange Manual, imports into Pakistan are restricted to Free-on-Board, Free-Carrier, Free-Alongside-Ship, Cost-and-Freight and Carriage-Paid-To terms. CIF approval has typically been granted only on a case-by-case basis.
The exception was granted after the Oil Companies Advisory Council warned that marine insurers have either withdrawn coverage or sharply raised premiums for voyages involving the Persian Gulf and Strait of Hormuz. “In the prevailing circumstances, obtaining adequate marine and war-risk insurance cover has become extremely difficult,” the OCAC wrote to the government, the SBP and the Oil and Gas Regulatory Authority. The council pointed to Pakistan State Oil’s recent spot tender on the Gallop platform for petrol, high-speed diesel and jet fuel on a C&F basis, which drew zero bids.
Freight rates for Gulf-bound tankers have roughly quadrupled while war-risk insurance premiums have surged, the OCAC said, reflecting the “rapidly evolving geopolitical situation” tied to the Iran-Israel-U.S. conflict.
Under a standard C&F (or CFR) contract, the supplier arranges freight to the destination port, but the Pakistani buyer must separately procure product insurance, including war-risk coverage — an obligation that has become nearly impossible in current markets. CIF shifts both freight and full marine insurance, including war-risk, to the supplier, with risk transferring to the buyer only once the cargo is loaded.
The change gives local refineries and oil-marketing companies greater flexibility to secure entire tanker cargoes quickly without having to negotiate separate insurance amid volatile global conditions. It applies to crude oil, refined petroleum products, base oil and allied materials.
Industry participants described the step as a pragmatic response to ensure uninterrupted fuel availability. The arrangement covers shipping and insurance up to the Pakistani port but excludes import duties; any damage during transit can be claimed against the supplier’s insurer.
The SBP reminded dealers of the reference in Paragraph 5 of Chapter 13 of the Foreign Exchange Manual and stressed that the 60-day window is strictly time-bound.
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