The State Bank of Pakistan (SBP) has announced a temporary measure permitting the import of crude oil and petroleum products on a Cost, Insurance, and Freight (CIF) basis. This approval will remain in effect for 60 days, with the primary objective of ensuring timely energy supplies amid ongoing volatility in global oil markets.
According to the SBP circular, the move aims to safeguard domestic energy security while providing importers with greater flexibility in navigating international price fluctuations. Previously, the central bank had authorised imports under various terms, including Free on Board (FOB), Free Carrier (FCA), Free Alongside Ship (FAS), Cost and Freight (CFR), and Carriage Paid To (CPT). The recent decision to allow CIF imports is seen as particularly beneficial under current market conditions, as it shifts certain logistical and insurance responsibilities to the sellers.
Under CIF terms, the seller bears the cost of freight and insurance and is responsible for the cargo until it reaches the designated port. Once the goods are loaded onto the vessel, however, the risk transfers to the buyer. By contrast, under FOB arrangements, ownership and risk transfer to the buyer as soon as the goods are loaded onto the ship. This distinction allows importers to better manage supply chain risks during periods of market instability.
The SBP has instructed importers to inform their clients about the revised terms and to comply with all procedural requirements. CIF-based imports will be permissible for a 60-day window from the date of approval.
Market analysts have welcomed the move, suggesting it will enhance liquidity in the energy sector and help importers maintain a more stable supply chain. They believe the measure could mitigate some of the challenges posed by international price swings and shipping disruptions.
Comparative Overview: CIF vs FOB
| Terms | Ownership Transfer | Risk Transfer | Cost Responsibility |
|---|---|---|---|
| CIF | Upon arrival at port | After loading onto ship | Seller bears freight & insurance costs |
| FOB | Upon loading onto ship | Upon loading onto ship | Buyer bears all costs |
Experts note that the CIF facility is expected to smooth Pakistan’s oil supply chain, strengthen domestic energy security, and reduce exposure to price volatility in international markets. By providing importers with greater flexibility, the measure is likely to foster a more resilient energy sector.
In conclusion, the 60-day CIF import approval represents a strategic initiative to stabilise Pakistan’s oil imports, ensuring uninterrupted supply while mitigating the risks associated with global market fluctuations.