Pakistan overhauls fuel pricing: How the revised mechanism will work 

ISLAMABAD: Pakistan's revised petroleum pricing mechanism introduces significant changes to the way fuel prices will be determined, published and monitored, while also tightening compliance requirements for oil marketing companies (OMCs) through strict conditions linked to fuel imports and refinery uplift. 

The most fundamental change is the shift to daily fuel pricing based on international market movements. Under the revised mechanism, the Free on Board (FOB) price for Motor Spirit (MS) and High-Speed Diesel (HSD) will be determined using a seven-working-day rolling average of the published Platts Arab Gulf assessments for MS-92 RON and HSD 10 ppm. Unlike the previous pricing regime, OGRA will determine and publish ex-depot prices every day, while prices announced on Friday will continue to remain effective on Saturdays and Sundays. 

The mechanism also revises the methodology for incorporating import premiums and other costs into domestic fuel prices. Where Pakistan State Oil (PSO) imports motor spirit during the previous seven working days, the weighted average of actual premiums, incidentals, and customs duty of those cargoes will be used. 

However, if no imports take place during that period, the calendar year-to-date average of premium, incidentals and customs duty will be applied. 

The framework further provides that if PSO concludes a long-term supply arrangement with a foreign supplier, such as OQ Trading Oman, the premium under that arrangement will be used whenever there have been no imports during the previous seven working days. 

For High-Speed Diesel, the revised mechanism follows a similar principle. Actual premiums, incidentals, and customs duty of PSO imported cargoes will apply where imports have taken place during the previous seven working days. If no imports occur during that period, the KPC term-contract premium will be used, while incidentals and customs duty will continue to be calculated based on the calendar year-to-date average. 

Another key feature of the revised framework is the enhanced operational role assigned to the Oil and Gas Regulatory Authority (OGRA). The regulator has been authorised to calculate and publish ex-depot petroleum prices daily on its official website without requiring prior approval from the federal government or the prime minister, although every daily publication will be intimated to the DG Oil office. To improve transparency, OGRA has also been directed to publish the daily Platts assessments for MS-92 RON and HSD 10 ppm on its website with effect from July 1, 2026, enabling market participants to compare international benchmarks with domestic prices. 

The revised mechanism also spells out how the petroleum levy will be administered. The levy cannot exceed the ceiling approved by the Cabinet, while applicable rates for the fiscal year will be conveyed by the Finance Division to the Petroleum Division for notification. Any revision during the year will require consultation with and the consent of the Finance Division. 

Perhaps the most significant compliance measure introduced under the revised framework is the linking of import allocations with the performance of oil marketing companies. Under the mechanism, HSD imports during FY2027 will continue to be allowed only through Pakistan State Oil, while MS imports by OMCs will be permitted according to their market share, subject to a minimum import parcel of 10,000 metric tonnes. 

More importantly, the revised mechanism ties future import allocations to compliance with both import and refinery uplift commitments. "In case of default in MS import commitment by any OMC, or delay beyond the agreed month of delivery, or default in committed upliftment from Refineries, it would be disqualified from grant of further import allocation for nine months by OGRA," sources told Profit. 

The provision effectively links an OMC's future import eligibility with its adherence to committed import schedules as well as its obligation to lift agreed fuel volumes from domestic refineries. 

Apart from these changes, the revised mechanism retains the existing treatment of exchange rate adjustment, Refinery Regulatory Duty (RRD), Research Octane Number (RON), HSD sulphur penalties and IFEM settlement. 

It also extends the daily pricing methodology to Superior Kerosene Oil (SKO) and Light Diesel Oil (LDO), both of which will now be priced using the same seven-working-day rolling average of the published Platts Arab Gulf assessments. 

OGRA has further been tasked with developing detailed and transparent operating procedures for implementing the revised pricing mechanism.