ISLAMABAD – The government has announced a petroleum relief package of Rs50 per litre for the low-income people as inflation continues to rise in the country.
In line with the directives of Prime Minister Shehbaz Sharif, the ministry of petroleum is drafting a fuel pricing scheme that aims at charging affluent consumers more for fuel, and using that money to reduce prices for the poor.
As the ministry has been given six weeks to draft the schemes, an economist, Ali Khizar, has explained on Twitter how the scheme will work. He cited Petroleum Minister Musadik Malik as source of his information.
In a series of tweets, he said cross subsidy model would be adopted under which “car users to pay taxes for bikes, rikshaw and small cars (below 800 cc) owners”. “PSO consumption (50% market share) is 47% for 2/3 wheelers & 53% cars/4-wheelers. Based on it, 53% car users to pay taxes for 47% bikes,” he wrote.
Talking about price mechanics, he said: “If OGRA’s prescribed price is Rs300/L, retail price to become Rs350 and registered users to get petrol at Rs250/L. Car folks pay extra Rs50/L Bike folks save Rs50/L No subsidy outside petrol sales 53% pays for 47% – price to settle at OMC levels”.
The data from Nadra, phone companies and vehicle ownership will be used to extend targeted subsidy. The owners of bike, rickshaw and small cars will have to register for the scheme through their registered phone number.
This policy to encourage higher bike usage versus car – this would mean less fuel consumed per Km – good
The cross subsidy can become insufficient provided bike/small usage to exceed 50% (currently at 51% including small cars' one tank – 1.3mn out 4mn cars are below 800cc )
— Ali khizar (@AliKhizar) March 20, 2023
“User to get benefit each time through one time password (OTP) – have this on machine at petrol pump and get its quota bikes cap 21 L/month (avg monthly consumption -PSO data) Maximum 3 L benefit in 24 hours Small Car cap 30 L/month (1/3rd of monthly consumption),” he wrote.
This policy aims at encouraging bike usage as it decrease fuel consumption per kilometer.
“The mechanism to revise every 15 days and the cross subsidy amount to adjust downwards to balance the books,” the economist said.
Who can avail the petrol relief package announced by PM Shehbaz?
