ISLAMABAD – Pakistan is gearing up for major shake-up of its petroleum pricing system, with the government considering a phased move that could eventually allow oil marketing companies to determine petrol prices instead of having rates directly fixed by the government.
Petroleum Pricing Committee has recommended June 2027 as a possible target for petrol deregulation, potentially marking a major turning point in how fuel prices are determined in Pakistan. The proposed date is not yet final. It remains a recommendation that must be considered and approved by the Prime Minister before any implementation timeline is confirmed.
The development came during a meeting of the Petroleum Pricing Committee chaired by Federal Petroleum Minister Ali Pervaiz Malik, where officials conducted a detailed review of the existing mechanism used to determine petroleum prices.
The committee agreed on the need to make the pricing system more transparent, predictable and competitive, while limiting the impact of sudden and unnecessary price fluctuations on consumers. Under the proposed roadmap, deregulation would not happen overnight.
Instead, Pakistan would gradually transition toward a market-based pricing system, under which international oil prices, supply and demand, operational costs, market conditions and the commercial strategies of oil marketing companies would have a greater influence on retail petrol prices.
Once deregulation is implemented, the government could step back from directly fixing retail petrol prices, allowing individual oil marketing companies to determine their rates based on their costs and prevailing market conditions. That does not mean the fuel market would be left completely unchecked.
Regulatory oversight and competition rules would remain in place, with the government aiming to prevent excessive profiteering, anti-competitive practices and exploitation of consumers.
The proposed reforms also address a major concern: what happens if diesel prices suddenly surge? The committee has agreed in principle to develop a rules-based intervention mechanism for exceptional situations.
Under the proposed framework, specific price shock triggers could be established. If diesel prices rise beyond predetermined thresholds, the government could take corrective measures even after the market-based system is introduced. This would effectively create a safety valve for extreme market disruptions.
The committee has also moved to revise the mechanism used to calculate the Inland Freight Equalization Margin (IFEM). OGRA assured the meeting that the FY2025-26 IFEM audit would be completed by the end of calendar year 2026.
The committee also directed OGRA to provide written recommendations on the performance and financial stability of existing oil marketing companies, as well as the possibility of consolidation or mergers within the sector.
Another major issue discussed was whether Pakistan should establish a fund to keep petroleum prices artificially stable. The committee reviewed successful and unsuccessful fuel price stabilisation models used internationally and directed the relevant sub-group to refine its proposals.
The committee is expected to submit its final report, after which the government will determine the precise mechanism, implementation timeline and consumer-protection measures.
The move follows government’s earlier steps toward a daily petroleum pricing mechanism, which was viewed as part of the broader transition toward deregulation.
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