The State Bank of Pakistan (SBP) has announced a temporary allowance for the import of crude oil and petroleum products on a Cost, Insurance and Freight (CIF) basis. This measure, effective for a period of 60 days, is aimed at ensuring the timely supply of energy amid ongoing global oil market volatility.
According to a circular issued by the SBP, the move is intended to safeguard Pakistan’s energy security while providing importers with greater flexibility in responding to international price fluctuations. Previously, the central bank had authorised oil imports under several terms including FOB (Free on Board), FCA (Free Carrier), FAS (Free Alongside Ship), CFR (Cost and Freight), and CPT (Carriage Paid To). However, the recent instability in global oil markets has prompted the temporary approval of CIF-based imports, which are considered more convenient for importers.
Under CIF terms, the seller bears the cost of freight and insurance and remains responsible for the goods until they reach the designated port. However, the risk associated with the goods transfers to the buyer once the shipment is loaded onto the vessel. In contrast, under FOB terms, both ownership and risk transfer to the buyer immediately upon loading. This distinction provides importers with a strategic advantage, particularly during periods of market uncertainty.
The circular further instructs importers to inform their clients of the new terms and to adhere strictly to the SBP’s guidelines. Imports under the CIF framework will be permitted for 60 days from the date of approval.
Market analysts have suggested that the temporary CIF approval is likely to enhance liquidity in Pakistan’s energy sector and stabilise supply chains, mitigating the risk of fuel shortages.
Comparative Overview: CIF vs FOB
| Term | Transfer of Ownership | Transfer of Risk | Cost Responsibility |
|---|---|---|---|
| CIF | Upon arrival at port | Upon loading on vessel | Seller bears freight & insurance costs |
| FOB | Upon loading on vessel | Upon loading on vessel | Buyer bears all costs |
This initiative is particularly significant for Pakistan, as the country remains highly sensitive to fluctuations in international energy prices. By adopting CIF-based imports, importers are now better equipped to ensure uninterrupted supply of crude oil and petroleum products, a crucial factor for national energy security and economic stability.
In conclusion, the SBP’s temporary CIF import allowance is expected to streamline Pakistan’s oil supply chain, reduce market risk, and provide importers with the operational flexibility needed to manage volatile global energy markets effectively.