Pakistan sets June 2027 target to deregulate petrol prices

ISLAMABAD – The federal government has set June 2027 as an interim target for deregulating petrol prices as part of a broader plan to reform the country's petroleum pricing mechanism and move towards a more market-oriented system. The decision was taken during a meeting of the Petroleum Pricing Committee, where officials discussed major changes to the existing framework for determining prices of petroleum products. The committee considered a proposal to link petroleum prices more closely with market conditions, paving the way for greater flexibility in fuel pricing. The proposed reforms are aimed at improving transparency in the pricing mechanism and gradually reducing the government's role in determining petrol prices. The officials also discussed measures to deal with sharp fluctuations in diesel prices. The committee decided to formulate a set of rules to minimize the impact of sudden price movements and provide greater protection to consumers against abrupt increases in fuel prices. The meeting also approved a new mechanism for the Inland Freight Equalization Margin (IFEM), which is an important component of the petroleum pricing framework. The mechanism is intended to address freight-related differences in petroleum prices across the country and ensure a more consistent pricing structure. Under the proposed reforms, June 2027 has been identified as a transitional target for deregulating petrol prices. The government plans to use the period leading up to the target date to introduce necessary changes and establish mechanisms capable of handling market-driven price fluctuations. The move comes as Pakistan continues efforts to reform its energy and fiscal systems and improve the efficiency of petroleum markets. A market-linked pricing model could eventually allow fuel rates to respond more directly to international oil prices and domestic market conditions. However, the officials have emphasized the need for appropriate safeguards to prevent excessive volatility from placing an undue burden on consumers. The implementation timeline and the final pricing formula are expected to be announced as the government advances its petroleum-sector reforms, they added.