The federal government has set June 2027 as its target to deregulate petrol prices, marking a major step towards reforming Pakistan’s fuel pricing system and promoting greater competition in the petroleum sector.
The decision came during a meeting of the Petroleum Pricing Committee chaired by Petroleum Minister Ali Pervaiz Malik. Officials reviewed proposed changes to the existing fuel pricing mechanism and preparations for a competitive market.
The reforms aim to make fuel prices more transparent and predictable while reducing the impact of sudden movements in international oil prices on consumers.
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The committee approved guidelines for government intervention in diesel prices during exceptional market conditions.
The proposed framework includes specific triggers for major price shocks and possible government measures to limit their impact on consumers.
Officials also reviewed the existing petrol pricing formula as part of preparations for the planned shift towards deregulation.
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The committee will submit its final recommendations to Prime Minister Shehbaz Sharif for approval.
Revised IFEM Formula Under Review
The committee also approved a revised method for calculating the Inland Freight Equalisation Margin (IFEM), an important component of petroleum pricing.
The Oil and Gas Regulatory Authority (Ogra) informed the meeting that its audit of IFEM for the 2025-26 financial year would conclude by the end of 2026.
Ogra will also prepare recommendations on the consolidation and performance of existing oil marketing companies.
The review will focus on improving efficiency through international best practices and modern technology.
Fuel Reserves Preferred Over Stabilisation Fund
Officials also examined proposals to establish a petroleum price stabilisation fund based on international models.
However, the committee concluded that maintaining adequate strategic fuel reserves would better support the country as it moves towards deregulation.
The proposed reforms would gradually replace government-administered fuel prices with a competitive, market-based system.
The government also aims to protect consumers from extreme fluctuations in global oil prices during the transition.
FBR to Review Petroleum Taxation
Meanwhile, a subcommittee headed by Mir Naeem Ghauri will meet the Federal Board of Revenue (FBR) chairman to assess whether changes to petroleum sector taxation are needed.
The review will consider changing market conditions and their potential impact on the petroleum pricing system.
