The government is preparing to increase petrol and diesel prices within days as it plans to partially pass on rising import costs to consumers while shifting part of the subsidy burden to provincial governments.
The development follows a meeting chaired by Finance Minister Muhammad Aurangzeb and attended by the four provincial chief ministers, Khyber Pakhtunkhwa’s finance minister, and senior federal officials to finalise a targeted fuel subsidy mechanism aimed at protecting vulnerable groups such as motorcyclists and farmers.
“Prices of both petrol and diesel are set to go up within days,” the official said, adding that the quantum of the increase would depend on the latest movements in international oil markets. Authorities are considering passing on the full impact of global price changes, although relief for selected segments remains under discussion.
Officials said the current price gap stands at around Rs100 per litre for petrol and more than Rs200 per litre for diesel compared to import-adjusted costs. A final decision on the extent of the increase will be taken after updated calculations are provided by the Petroleum Division and the Oil and Gas Regulatory Authority later this week.
The federal government has already absorbed about Rs129 billion in fuel subsidies over the past three weeks and plans to limit total support to around Rs158 billion, increasing pressure on provinces to share the financial burden.
Following consultations between President Asif Ali Zardari and Prime Minister Shehbaz Sharif, provinces were asked to contribute toward targeted relief measures. Punjab and Sindh are expected to share the burden based on their population shares under the National Finance Commission formula, while Khyber Pakhtunkhwa and Balochistan would participate according to their respective fuel consumption levels.
Provincial governments agreed in principle to provide subsidised petrol to motorcyclists under a uniform national mechanism expected to be announced soon. Sindh will extend diesel subsidies to farmers through its Hari Card database, while Punjab and Khyber Pakhtunkhwa are expected to adopt similar arrangements.
Officials expressed concern that higher diesel prices could raise transportation costs and add to food inflation, particularly affecting perishable items. Provinces also agreed not to increase fares for Bus Rapid Transit services, although this could create disparities for commuters outside major urban centres.
According to estimates, the targeted subsidy programme may require between Rs15 billion and Rs18 billion per week, potentially rising to Rs30 billion depending on global price trends. Officials believe the burden could be jointly absorbed by the federal and provincial governments until the end of the current fiscal year in June.
The meeting agreed to develop a coordinated framework for implementing targeted subsidies as part of broader petroleum pricing reforms aimed at easing fiscal pressures while limiting inflationary impact on consumers.
