The federal government has indicated it could reintroduce targeted fuel subsidies within days if tensions in the Middle East continue to push global oil prices higher. At the same time, it reaffirmed its commitment to the newly introduced daily petroleum pricing mechanism.
Petroleum Minister Ali Pervaiz Malik said the government would revive the targeted subsidy model previously introduced if the ongoing US-Iran conflict continued to affect international oil markets. He added that the programme could once again be implemented with financial support from provincial governments.
The minister said the federal government had earlier allocated Rs. 130 billion for targeted fuel subsidies. The initiative was later expanded with provincial participation to help protect vulnerable consumers from the impact of rising fuel prices.
Despite criticism of the new pricing system, Malik defended the move to daily petroleum price revisions. He said the mechanism gradually passes changes in international oil prices to consumers, reducing the risk of sudden and significant price increases that were common under weekly or fortnightly revisions.
Speaking at a meeting of the Senate Standing Committee on Petroleum, the minister said the government had depoliticized fuel pricing by authorizing the Oil and Gas Regulatory Authority (OGRA) to determine prices using a transparent formula linked to international market trends.
OGRA Chairman Nabeel Awan told the committee that daily fuel prices are calculated using a seven-day rolling average of Platts international benchmarks. According to him, this system spreads global price fluctuations over several days instead of passing them directly to consumers in a single adjustment.
The Senate committee also raised concerns about the growing tax burden on petroleum products. Petroleum dealers informed lawmakers that daily price revisions were creating operational and business challenges. The committee directed OGRA to consult all stakeholders and present recommendations to address the dealers’ concerns.
Separately, a government committee reviewing the petroleum pricing mechanism endorsed the daily pricing formula. It also recommended further reforms, including complete digitization of the petroleum supply chain, a review of the Inland Freight Equalisation Margin (IFEM), and an assessment of the moratorium on new oil marketing companies and the current windfall tax regime.
Also read: Goods Transporters Reject Daily Fuel Pricing Policy
