- Currently, petroleum prices are revised on weekly basis.
- PM-formed committee prefers daily pricing mechanism.
- Model expected to be hybrid system rather than deregulation.
ISLAMABAD: The government is considering a proposal to revise petroleum product prices on a daily basis, significantly reducing its role in the fuel pricing process, The News reported, citing a senior official of the Petroleum Division.
Under the proposed system, the Oil and Gas Regulatory Authority (Ogra) would be solely responsible for determining the prices of motor spirit (MS), high-speed diesel (HSD), light diesel oil (LDO), and kerosene oil (KO) every night, with the revised prices taking effect at 12am, the senior official told The News.
Currently, petroleum prices are revised on a weekly basis. Before that, they were adjusted fortnightly and, earlier, on a monthly basis. “The proposed mechanism would eliminate the existing practice of circulating summaries for approval and end the roles of Petroleum Division, Finance Division, and prime minister in the final price determination process.”
The PM had earlier constituted a committee to review a new petroleum pricing mechanism. The committee has held four meetings, the latest on July 13, chaired by Petroleum Minister Ali Pervaiz Malik.
The meeting was attended by Federal Minister for Economic Affairs Ahad Khan Cheema, Minister of State for Finance Bilal Azhar Kayani, Ogra Chairman Masroor Khan Nabeel Awan, representatives from KPMG, members of the committee, officials from Finance Division, Pakistan State Oil (PSO), Ministry of Law and Justice, Petroleum Division and other senior officials.
KPMG, which was engaged by the Petroleum Division to evaluate future pricing options, presented four possible mechanisms — monthly, fortnightly, weekly, and daily pricing — along with the advantages and disadvantages of each.
According to sources, the committee members have so far shown a preference for the daily pricing mechanism. The proposed model is expected to be a hybrid system rather than complete deregulation.
Under this framework, the government would no longer determine the Inland Freight Equalisation Margin (IFEM), oil marketing companies’ (OMCs) margins, or dealers’ commissions. Instead, the OMCs would set these components themselves, similar to the existing pricing mechanism for High Octane Blending Component (HOBC).
However, Ogra would continue to oversee the market by monitoring petroleum stocks maintained by the OMCs and ensure compliance with storage requirements while preventing hoarding.
Under the proposed mechanism, if international crude oil and refined petroleum product prices decline sharply, the resulting savings could be deposited into the stabilisation fund. These resources would then be used to cushion consumers from future price shocks.
For example, the government could maintain a price band of Rs275 to Rs325 per litre. If domestic prices fall below Rs275 per litre, the savings could be transferred to the stabilization fund. Conversely, if prices rise above Rs325 per litre due to external market shocks, the accumulated funds could be utilised to stabilise retail prices and provide relief to consumers.
