The federal government has indicated it could reintroduce targeted fuel subsidies within days if tensions in the Middle East continue to keep global oil prices elevated, while reaffirming its commitment to the newly introduced daily petroleum pricing mechanism.
Petroleum Minister Ali Pervaiz Malik said the government would revive the targeted subsidy model used previously if the renewed US-Iran conflict persisted, adding that the initiative 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 before expanding the mechanism with provincial participation to shield vulnerable consumers from rising fuel costs.
Despite criticism of the new pricing system, Malik defended the shift to daily petroleum price revisions, saying the mechanism gradually passes international price movements to consumers and helps avoid sharp price shocks associated with weekly or fortnightly revisions.
Addressing 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 under a transparent formula linked to international market trends.
OGRA Chairman Nabeel Awan told the committee that daily prices are calculated using a seven-day rolling average of Platts international benchmarks, allowing global price fluctuations to be spread over several days rather than passed on immediately to consumers.
The Senate panel also expressed concern over the tax burden on petroleum products, while petroleum dealers said frequent price revisions were creating operational challenges. The committee directed OGRA to consult stakeholders and submit proposals addressing dealers’ concerns.
Separately, a government committee reviewing the petroleum pricing mechanism endorsed the daily pricing formula and recommended further reforms, including end-to-end 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 windfall tax regime.
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