Pakistanis are bracing for another increase in the price of petrol and diesel fuel within days, adding to the economic pressures facing households and businesses across the country. Although the exact amount of the hike remains under discussion, officials indicate the increase is intended to partially reflect rising global import costs while maintaining some level of subsidy for vulnerable segments of the population, including motorcycle riders and farmers.
The move comes after a meeting coordinated by Finance Minister Muhammad Aurangzeb with provincial governments, including all four chief ministers and key economic ministers, to address the escalating cost of petroleum products. The central government has already absorbed approximately ₨129 billion in subsidies over the past three weeks, with a self-imposed limit of ₨158 billion, signaling the need for a broader sharing of the financial burden.
The situation is complex, with a current price gap estimated at around ₨100 per litre for petrol and more than ₨200 per litre for diesel. The debate centers on how much of the international price impact to pass on to consumers, with considerations for targeted protections. A final decision is expected by Friday, based on the latest price calculations from the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA).
Seeking a Shared Burden: Provinces and the Centre
The federal government is pushing for the provinces to share the cost of maintaining fuel subsidies, arguing that the current situation is unsustainable without broader participation. President Asif Ali Zardari and Prime Minister Shehbaz Sharif reportedly urged the provinces to contribute, framing it as a “noble cause.”
The proposed arrangement would spot Punjab and Sindh providing subsidies based on their respective populations, in line with the National Finance Commission (NFC) formula. Balochistan and Khyber Pakhtunkhwa (KP) would contribute based on their respective consumption levels. However, securing firm commitments from the provinces has proven challenging, with initial discussions failing to yield concrete financial pledges.
Punjab and Sindh initially advocated for passing the full price increase onto consumers while offering direct, targeted subsidies to priority sectors. This approach, however, was cautioned against due to concerns about potential political backlash.
Targeted Relief: Bikers, Farmers, and the Transportation Challenge
Despite the broader debate over price increases, a consensus emerged around providing targeted relief to specific groups. All provinces agreed to directly subsidize fuel costs for motorcycle and three-wheeler owners, with the Prime Minister expected to announce details regarding rationing quantities to ensure national uniformity. The pricing for these vehicles will be determined based on the latest landed cost of imported fuel.
Sindh plans to extend diesel subsidies to the farming community through its existing “Hari Card” database. Punjab and KP have agreed to follow suit, implementing similar programs to support their agricultural sectors. However, officials acknowledge a significant challenge in addressing the inflationary impact of diesel price increases on goods transportation, particularly for perishable items.
Estimates suggest that the proposed subsidy measures will require approximately ₨15-18 billion in weekly funding, shared between the federal government and the provinces. Even if the need rises to ₨30 billion per week, officials believe it could be jointly absorbed over the next three months, until the end of the fiscal year on June 30, although the future trajectory of global oil prices remains uncertain.
BRT Fares and Regional Disparities
The provinces have agreed to refrain from increasing fares on their Bus Rapid Transit (BRT) systems. However, concerns were raised that this could create disparities for populations living outside of major cities, who rely on other forms of transportation.
Finance Minister Outlines Collaborative Approach
In an official statement, Finance Minister Muhammad Aurangzeb emphasized the ongoing consultations with provincial governments, describing them as part of a broader effort to develop a “coordinated and sustainable approach to petroleum pricing and subsidy reforms.” He underscored the importance of collaborative decision-making and close coordination between the federal government and the provinces. Dawn News reported on the assurances provided by the Finance Minister to the Khyber Pakhtunkhwa Chief Minister regarding support in resolving legitimate issues.
A working framework outlining a potential targeted subsidy mechanism is currently being developed and will be shared with all stakeholders for further input. The provinces will continue to refine their proposals, with the goal of reaching a consensus-based solution.
As global oil prices continue to fluctuate, the coming days will be critical in determining the extent of the fuel price increase and the level of support provided to vulnerable segments of the Pakistani population. The next key checkpoint will be Friday, when the Petroleum Division and OGRA are expected to provide updated price calculations, informing the final decision on fuel prices. The outcome of these deliberations will have a significant impact on the cost of living and economic activity across the country.
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