Govt eyes petrol deregulation by June next year

The government has decided not to launch the Petroleum Prices Stabilisation Fund (PPSF) and instead intends more significant changes to the fuel pricing system. By June 2027, petrol will be fully deregulated, with high-speed diesel following at a later stage. At a recent meeting, the committee on petroleum pricing, led by Petroleum Minister Ali Pervaiz Malik, agreed to empower the Oil and Gas Regulatory Authority (Ogra) to adjust diesel pricing without frequent cabinet approvals in case of unusual spikes in diesel crack spread.

This adjustment would take place through a prescribed floor-and-cap mechanism. Ogra would also be entrusted with revising diesel pricing based on crude-based calculations if a significant increase in diesel crack spread occurs. The committee approved the guiding principles for potential rules-based interventions in emergency situations, including defined price-shock triggers and corrective measures.

The committee favored daily adjustments over a price stabilisation fund, believing that maintaining adequate fuel stocks would better stabilize the market and reduce the need for additional taxation. The government aims to proceed in phases, beginning with petrol deregulation by June 2027. Deregulation could lead to more frequent price fluctuations for consumers, potentially offering cheaper options in some cases but exposing them more directly to international oil price fluctuations and exchange rate changes.

The committee will submit its final report to the Prime Minister for approval, after which a two to three-meeting process is expected to finalize the recommendations. The committee also reviewed the Inland Freight Equalisation Margin (IFEM) mechanism, agreeing on a revised methodology for calculating it and directed Ogra to submit written recommendations on consolidation and performance of existing oil marketing companies.