Pakistan Sets June 2027 Target for Full Petrol Price Deregulation

ISLAMABAD: Pakistan has set a tentative June 2027 deadline for fully deregulating the petrol pricing framework as the government moves toward a more market-oriented system while seeking safeguards against sudden price shocks. The target was agreed during a meeting of the Petroleum Division’s Committee on Petroleum Pricing, which reviewed recommendations for changing the existing fuel-pricing mechanism.

Federal Minister for Petroleum Ali Pervaiz Malik chaired the meeting, where officials examined proposals intended to make petroleum pricing more transparent and predictable. According to the Petroleum Division, the planned transition will be carried out in phases, with the objective of introducing greater competition while limiting the impact of abrupt market volatility on consumers.

The committee also reviewed the Inland Freight Equalisation Margin, or IFEM, mechanism used in the petroleum pricing system. Members agreed on a revised methodology for calculating IFEM, while the Oil and Gas Regulatory Authority assured the committee that the audit covering fiscal year 2025-26 would be completed by the end of calendar year 2026. The proposed changes form part of a wider effort to strengthen the existing pricing framework before full deregulation.

For diesel, the committee approved guiding principles for possible rule-based government intervention during emergency situations. These principles are expected to establish defined triggers for severe price shocks and identify possible corrective measures. The approach is intended to retain a mechanism for responding to exceptional conditions even as Pakistan gradually moves toward greater market-based fuel pricing.

OGRA was also directed to provide written recommendations on consolidation and performance within the oil marketing sector, particularly regarding the adoption of modern technologies and industry best practices. Separately, the committee considered proposals for a price stabilisation fund based on international models. Members asked the relevant subgroup to refine its work but indicated that maintaining sufficient fuel reserves could be more appropriate than creating such a fund as the market moves toward deregulation.

The committee’s recommendations will now be compiled into a final report for submission to the prime minister for consideration and approval. Another subcommittee, headed by Naeem Ghauri, is expected to engage with the Federal Board of Revenue to examine whether Pakistan’s petroleum taxation structure should be reviewed in response to changing market conditions. Representatives of OGRA, the FBR, the Finance Division, KPMG and other officials also participated in the meeting.

The proposed shift could significantly change how petrol prices are determined in Pakistan, where fuel costs have a broad effect on transport, businesses and household expenses. The government says its planned framework is intended to improve efficiency, competition and transparency while protecting consumers from sudden price movements. The next major steps include finalising the committee’s recommendations, completing regulatory and taxation reviews and securing approval for the phased transition toward the June 2027 deregulation target.