Key Takeaways
- Government may reintroduce targeted fuel subsidies if Middle East tensions persist.
- Petroleum Minister Ali Pervaiz Malik claims transparent daily pricing mechanism protects consumers.
- Ogra sets petroleum prices based on international market benchmarks.
The government has indicated it could reintroduce targeted fuel subsidies within the next few days, contingent upon ongoing tensions in the Middle East. Petroleum Minister Ali Pervaiz Malik stated that if renewed US-Iran attacks do not subside soon, the targeted subsidy mechanism will be brought back to shield consumers from price shocks.
Malik defended the government's petroleum pricing deregulation plan, asserting that a transparent daily pricing system has been introduced for the benefit of common Pakistanis. He explained that this mechanism gradually transfers international fuel prices to consumers rather than causing significant price spikes through weekly or fortnightly adjustments.
The Petroleum Minister highlighted that while Pakistan is under an International Monetary Fund (IMF) programme and faces limited financial resources, recovering legitimate fuel costs from consumers remains the only viable option. Otherwise, he warned, someone else would have to bear the burden if prices were artificially controlled.
Malik emphasized that the transparent daily pricing mechanism was introduced in the interest of common people, allowing them to gradually adapt to international price fluctuations. He added that Ogra is presenting its “transparent working” on its website and that real benefits will only be realized when cheapest fuel reaches consumers through competition and transparency.
During a meeting with the Senate Standing Committee on Petroleum, Malik informed senators that Ogra was setting petroleum prices in line with movement in the international market using a transparent formula. He stated that the daily pricing mechanism protects against price shocks by relying on a seven-day rolling average of Platts international benchmarks.
Senators provided mixed feedback to the new pricing mechanism. Senator Amir Chishti appreciated the daily pricing system, while Senator Saifullah Abro described it as “slow poison.” The committee held a detailed discussion questioning the rationale for replacing the previous fortnightly system with the daily one.
Malik also mentioned that Chief of Defence Staff and Chief of the Army Staff Field Marshal Asim Munir and Prime Minister Shehbaz Sharif were working to end the US-Iran war, which he believed would lead to a reduction in global oil prices. He added that real relief for common Pakistanis could only be achieved when both these factors came into play.
The Petroleum Minister stressed that while the government remains committed to its deregulation plan and transparent pricing mechanism, it is also considering targeted subsidies as a safety net if necessary. He stated that the prime minister and the entire government understood the difficulties faced by common Pakistanis and were working towards finding solutions.
If this matter [renewed US-Iran attacks] does not end in a few days, we will bring back the targeted subsidy mechanism that we previously used to prevent the price shock from reaching the people.
Ali Pervaiz Malik, Petroleum Minister
We have tied our hands ourselves and handed over a transparent system to the people.
Ali Pervaiz Malik, Petroleum Minister
