Pakistan refineries to absorb Rs15 a litre petrol hike for 30 days, shielding motorists from a Rs15 billion monthly burden
Pakistan’s oil refineries will absorb a roughly Rs15-per-litre increase in petrol prices for 30 days, carrying an estimated Rs15 billion a month in costs under a revised pricing mechanism approved by the federal cabinet, Petroleum Minister Ali Pervez Malik announced on Monday.
Pakistan’s government has persuaded local oil refineries to absorb a looming Rs15-per-litre increase in petrol prices, sparing motorists a sharp rise at the pump for the next 30 days at an estimated cost of about Rs15 billion a month to the industry. The arrangement was announced on Monday by Petroleum Minister Ali Pervez Malik at a joint news conference in Islamabad with Information Minister Attaullah Tarar, and it explains why petrol prices did not rise last Friday despite a jump in international costs.
The increase that was averted had been due on Friday, 31 October. Rising global prices, driven by the United States-Iran war and its disruption of shipping and energy supplies, had pushed up the cost of imported fuel to a point where, under the normal formula, petrol would have become about Rs15 a litre dearer. Instead, the minister said, refineries agreed to the government’s appeal and absorbed the increase, allowing the government to keep petrol around Rs15 a litre cheaper than international market rates.
The mechanism behind the relief was approved by the federal cabinet on 30 October and runs for 30 days. Under it, the import price of petrol is calculated on the basis of the actual cost of the relevant cargo imported by Pakistan State Oil. For local refineries, however, the ex-refinery price is calculated by temporarily fixing the premium, incidentals and customs duty at their levels on 7 March 2026, before the war began. The difference between the higher import-linked price and that frozen refinery price is then surrendered by refineries through the petroleum levy account, with the benefit passed on to consumers through a correspondingly lower retail price.
The numbers show why the government felt it had to intervene. Before the war, refineries operated on an import premium benchmark of about $5 to $6 a barrel. That premium has now exceeded $20 a barrel, and subsequent Pakistan State Oil tenders have fetched premiums of $25 to $30 a barrel, as freight, insurance and other logistics costs have soared amid the conflict. The minister said refineries would collectively carry a burden of roughly Rs15 billion a month under the arrangement, equivalent to about Rs50 a litre in levy terms on the volumes concerned, while the benefit to the public works out at about Rs15 a litre at the pump.
Malik also argued that the industry could afford to help, at least temporarily. He said refineries had earned more profit in the last three months than in an entire year, with government support in arranging crude oil supplies so they could operate at maximum throughput. “I am grateful that they listened to our appeal and absorbed roughly a Rs15 increase that was coming due for petrol on Friday, helping the government maintain prices,” he said, referring to the refineries.
The refineries themselves see the burden very differently. In a joint letter dated 31 October to the petroleum minister, they protested the revised mechanism, warning that it imposed a financial burden of Rs49.02 a litre on them and jeopardised multibillion-rupee investments committed under the Brownfield Refining Policy, which was meant to encourage upgrades to existing plants. Attock Refinery chief executive Adil Khattak was reported as putting the cost to domestic refineries at approximately Rs49 a litre. The government’s response, in effect, is that the arrangement is temporary and exceptional, justified by an unusual regional crisis.
To make the temporary system work, refineries are required to submit daily petrol sales data and payment records to the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA) for reconciliation, so that the levy amounts surrendered can be checked against actual sales. That reporting requirement is a key part of the deal: without it, the government could not verify that the benefit of the frozen refinery price was actually reaching consumers rather than being retained somewhere in the supply chain.
The announcement also carried reassurance on a second fuel worry: gas supplies. Malik said arrangements had already been made to ensure sufficient gas supplies for November, and that efforts were under way to avoid shortages in December and January, the peak winter months when demand rises and supply has in past years fallen short. The information minister, meanwhile, assured the country that Pakistan had sufficient petroleum stocks overall.
The arrangement sits alongside the separate fortnightly price revision that took effect on Tuesday, under which petrol was cut by Rs3.40 a litre and diesel by Rs7.76 a litre. That cut reflects movements in international prices and exchange rates under the regular formula, while the refinery mechanism deals with the additional war-related premium that would otherwise have been added on top. Together, the two moves mean motorists are paying less than they would have if either the regular increase or the war premium had been passed through in full.
What happens when the 30 days run out is now the central question. The minister has said the government could move towards deregulation within that period, and that further consultations with refineries were scheduled for the day after the announcement. If global oil prices and shipping premiums remain high, the government will face a choice between extending a costly arrangement that refineries say is unsustainable, letting prices rise by the full amount, or finding a longer-term pricing formula that shares the burden differently. For households already squeezed by inflation and high fuel costs, the next revision, due in late November, will be watched closely as the first test of whether this temporary shield becomes a bridge to a new system or simply delays a painful increase.
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