Pakistan refineries to absorb Rs15bn a month to hold down petrol prices, ministers say

Pakistan’s oil refineries will absorb about Rs15 billion a month to keep petrol cheaper, Petroleum Minister Ali Pervaiz Malik and Information Minister Attaullah Tarar said at a press conference in Islamabad on Monday.

The ministers said the step averted a Rs15 increase due on Friday, as the US-Israeli war on Iran raised oil costs.

How do Pakistan’s refineries keep petrol prices down?

Refineries bear about Rs15 billion a month, which lets petrol be sold Rs15 per liter below the international market rate. Malik said the refineries’ premium stood at $5 a barrel before the crisis and that a $20 limit had now been set. He said the government would have to step in to protect the public if conditions worsen.

Why did the government ask refineries to take on the Rs15 increase?

Malik said Prime Minister Shehbaz Sharif had met refineries to look for ways to avoid steep price rises. He said the refineries had raised their throughput with government help and had made profits from it over the past three months. They were then asked to support the public, he said, and agreed.

Malik thanked the refineries and said consumers would see further improvement. Tarar gave a different account of how the decision was reached, saying the prime minister had directed refineries to absorb the increase, which was driven by rising international prices.

Malik added that the government did not want to be “cruel to anyone” and would act through consultation, keeping the public’s interests in mind.

What is Pakistan’s fuel subsidy scheme?

Tarar also spoke about the fuel subsidy scheme the prime minister announced on September 13. Under it, motorcycle owners who register by SMS receive a weekly concession of Rs500 on petrol. Owners of 800cc cars get 10 liters of petrol every 10 days at Rs100 less per litre.

More than 15 million unique users have registered, and about Rs27 billion has been allocated so far, Tarar said. He called the scheme and the move on Friday’s price “a unique relief that is not available in the rest of the world”.

He also said Pakistan’s macroeconomic indicators had stayed largely stable and that the economy had not been hit as hard as others by the Middle East situation.

Will Pakistan return to fuel deregulation?

Asked about deregulation, Malik said he was its “biggest advocate” and that competition protects consumers. He said the government would return to that agenda once the regional crisis ended, but that public relief was the priority for now.

He said he hoped the crisis would move towards a peace agreement so the government could pursue its aims of “taking the system towards improvement, deregulation and refinery upgrades”.

Is there a fuel shortage in Pakistan?

Both ministers said there was no fuel shortage. Malik said supplies for November were fully covered, while decisions on December and January, the winter months, were still to be taken.

He said the prime minister had ordered any necessary steps to secure them.