Govt weighs fuel price hike as gap hits Rs100 petrol, Rs200 diesel

The federal and provincial governments are finalising a petroleum price increase within days as the gap between domestic and international prices widens to around Rs100 per litre for petrol and over Rs200 per litre for diesel, Dawn reported. 

The decision was discussed in a meeting chaired by Muhammad Aurangzeb, attended by provincial leadership, federal ministers, and senior officials to review pricing options and subsidy limits.

Officials said the final quantum of the increase will depend on updated calculations by the Petroleum Division and the regulator, expected later this week. Authorities are considering multiple scenarios, including passing the full increase on petrol while partially adjusting diesel prices, though a full pass-through has not been ruled out.

The price adjustment comes as the government faces rising fiscal pressure from maintaining fuel subsidies. Around Rs129 billion has already been spent over the past three weeks to keep prices stable, with the total subsidy envelope expected to be capped near Rs158 billion.

Officials indicated that the government is attempting to balance fiscal constraints with consumer protection by designing targeted subsidies for specific groups, including motorcyclists and farmers, rather than maintaining broad-based price support.

The rise in landed fuel costs has been driven by global oil market volatility, increasing import premiums, and supply disruptions in the region. Authorities said continuing to absorb the full impact of international prices would further strain public finances and widen fiscal pressures.

The proposed increase is part of efforts to gradually align domestic prices with global levels while limiting the burden on vulnerable segments through selective relief measures.

Targeted subsidy framework under discussion

The federal and provincial governments have agreed on a working framework for a targeted subsidy mechanism as part of broader petroleum pricing reforms. The understanding was reached during consultations at the Finance Division, where provinces presented proposals based on administrative capacity and available data.

Officials said the framework will be developed further and shared with stakeholders to reach a consensus-based approach. Discussions focused on shifting away from generalised subsidies toward targeted support for vulnerable groups while maintaining fiscal discipline.

Participants reviewed options for delivering subsidies through digital platforms, existing databases, and cash transfer systems, with emphasis on transparency, accountability, and coordination between federal and provincial governments.

The finance minister said the consultations are part of ongoing efforts to develop a coordinated national strategy on fuel pricing and subsidy reforms, while ensuring protection for lower-income segments.

The meeting was attended by provincial chief ministers, federal ministers including Ali Pervaiz Malik and Ahad Cheema, along with senior officials from relevant ministries.