Pakistan Plans Petrol Deregulation by June 2027 Amid Pricing Mechanism Changes

The government of Pakistan is moving towards a significant overhaul of its petroleum pricing structure, with the complete deregulation of petrol set for June 2027. This decision, made during a meeting led by Petroleum Minister Ali Pervaiz Malik, reflects a shift away from the recently established Petroleum Prices Stabilisation Fund (PPSF).

During the discussions, the committee agreed to empower the Oil and Gas Regulatory Authority (Ogra) to make adjustments to high-speed diesel (HSD) pricing based on crude oil fluctuations without needing repeated cabinet approvals. This decision is particularly significant given that the cabinet recently capped the HSD crack spread at $41.89 per barrel, following a period of extraordinary profit for local refineries.

New Pricing Framework in the Pipeline

The committee has recognized that daily adjustments to fuel prices have contributed positively to market stability, thereby diminishing the necessity for a price stabilisation fund that would require additional taxation. Instead, the government plans to establish a phased approach to deregulation, starting with petrol, which will allow oil marketing companies to compete on pricing.

As part of this transition, consumers may experience more frequent price changes, with potential variations across different oil marketing companies. This could lead to competitive pricing, although it also means that consumers will be more vulnerable to fluctuations in international oil prices and exchange rates.

Future Steps and Recommendations

The committee has outlined a series of recommendations intended to fortify the current pricing mechanism, which will be presented to the Prime Minister for approval. Additional technical input is still required, with further meetings anticipated to finalize the details. The existing Inland Freight Equalisation Margin (IFEM) mechanism will also see revisions to ensure uniform pricing across the country.

In addition, the committee has tasked Ogra with submitting recommendations regarding the performance and consolidation of oil marketing companies, aiming to encourage best practices and advanced technologies within the sector. The overall goal is to enhance pricing predictability and transparency while facilitating a smooth transition to a deregulated market.

Source: www.dawn.com