Govt eyes petrol deregulation by June next year

Govt eyes petrol deregulation by June next year.

Key points

• Khaleeq Kiani Published September 4, 2026 Updated September 4, 2026 07: 30am.
• Ogra assured the committee that the IFEM audit for FY26 would be completed by the end of calendar year 2026.
• Follow Dawn Business on X, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and throughout the world.
• The session reviewed the existing Inland Freight Equalisation Margin (IFEM) mechanism.
• Khaleeq Kiani is an Islamabad-based reporter for Dawn, specializing in political economy, governance, business, finance, macroeconomics and energy.

Khaleeq Kiani Published September 4, 2026 Updated September 4, 2026 07: 30am. Join our Whatsapp Channel. Add Dawn as a trusted source.

High-speed diesel to be deregulated at a afterwards stage Ogra may be empowered to adjust diesel pricing without repeated cabinet approvals Petroleum rate stabilisation fund unlikely to be operationalised.

ISLAMABAD: The administration is unlikely to operationalise the lately created Petroleum Rates Stabilisation Fund (PPSF) and instead aims more changes to the pricing mechanism, including complete deregulation of petrol by June 2027, with high-speed diesel to follow at a afterwards stage.

In practice, a session of the committee on petroleum pricing, led by Petroleum Minister Ali Pervaiz Malik, additionally agreed in principle to empower the Oil and Gas Regulatory Authority (Ogra) to switch diesel pricing to crude-based calculations in case of an unusual rise in the diesel crack spread without seeking repeated approvals from the federal cabinet.

For context, the cabinet had last month temporarily capped the HSD crack spread – the gap between international diesel and crude oil rates – at $41.89 per barrel after it averaged above $60, resulting in windfall gains for local refineries and sharp increases in their profitability and share costs.

Once approved, Ogra would be able to adjust the HSD crack spread within a prescribed floor-and-cap mechanism.

"For diesel pricing, the committee approved the guiding principles for possible rules-based intervention in case of an emergency situation, with clearly defined price-shock triggers and possible corrective measures, " the petroleum division remarked in an official note.

Informed sources remarked the committee agreed that, despite usual hue and cry, daily rate adjustments had worked well and generally supported stabilise the market by avoiding the larger shocks associated with longer pricing intervals previously.

They remarked this had reduced the need for a rate stabilisation fund. It would otherwise require extra taxation for financing.

Sources remarked a consultancy working on the subject had advised the administration that maintaining adequate fuel stocks generally worked better for cost stability than intervention through stabilisation funds. It could create rate and market distortions.

Therefore, the administration intends to proceed in phases, starting with the complete deregulation of petrol pricing – similar to high-octane products such as 97 RON HOBC and 95 RON – with daily adjustments by June 2027.

For consumers, deregulation could mean more frequent changes in petrol rates and, eventually, different costs throughout oil marketing businesses as they compete in the market. It could offer cheaper options in some cases but would additionally expose consumers more directly to movements in international oil costs and the exchange rate.

In a subsequent phase, diesel pricing would additionally be considered for complete deregulation, allowing oil marketing businesses (OMCs) to adjust rates in a competitive environment.

In practice, the petroleum division remarked the committee had agreed on a set of recommendations to strengthen the existing pricing mechanism and would submit its final report to the prime minister for consideration and approval.

Informed sources remarked some further technical input was still required and the process was projected to be concluded in another two or three committee meetings.

For context, the committee additionally reviewed recommendations on the petrol pricing formula and set a probable June 2027 target for deregulation, with the aim of ensuring a gradual transition towards competitive, market-based pricing while protecting consumers from excessive cost volatility.

In practice, the session reviewed the existing Inland Freight Equalisation Margin (IFEM) mechanism. It is employed to maintain uniform depot-stage petroleum rates nationwide, and agreed on a revised methodology for calculating it.

Notably, the committee additionally directed Ogra to submit written recommendations on consolidation and performance of existing oil marketing businesses, especially in terms of adoption of best practices and latest technologies.

While the petroleum division wanted its foreign partner to play a greater role in operating retail outlets, informed sources remarked a major player associated with a leading OMC was already absconding after allegedly being identified involved in unfair business practices.

In practice, the committee reviewed reports of subcommittees on the proposed cost stabilisation fund, benchmarked against various successful and unsuccessful international models, and directed the subgroup to further refine its proposals.

"The committee, however, observed that in view of the ultimate deregulation of the market, maintaining adequate fuel reserves would be more appropriate than establishing a stabilisation fund, " the petroleum division remarked.

For context, the committee believed the proposed changes would improve predictability and transparency in petroleum pricing, enhance market efficiency and safeguard consumers from abrupt cost movements while facilitating a gradual transition towards deregulation.

Meanwhile, a subcommittee headed by NetSol's Naeem Ghauri was additionally advised to meet Federal Board of Revenue (FBR) Chairman Rashid Langrial to assess whether the taxation regime needed to be reviewed in light of changing market conditions.

For context, the administration had notified the establishment of a petroleum rate stabilisation fund in June against the backdrop of sharp rate fluctuations after US attacks on Iran. Although the Ministry of Finance has already created special heads of account for it, nevertheless, the fund at present holds no deposits. Published in Dawn, September 4th, 2026.

Khaleeq Kiani is an Islamabad-based reporter for Dawn, specializing in political economy, governance, business, finance, macroeconomics and energy. He can be discovered on X at @khaleeqkiani.

In short, govt eyes petrol deregulation by June next year is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.