Govt shares petroleum pricing strategy for programme aimed at providing relief to the poor

Published March 22, 2023
A screengrab of a page from the report listing the three phases in which the scheme will be implemented.
A screengrab of a page from the report listing the three phases in which the scheme will be implemented.

The government on Wednesday shared its strategy for the recently-announced fuel relief programme, which is to be implemented in three phases and will “provide a relief of up to Rs50 per litre to the poor”.

The scheme’s announcement had come days after the government increased the prices of all petroleum products — except the insignificant light diesel oil — by up to Rs13 per litre for the next fortnight.

In a report that details the pricing strategy behind the Prime Minister’s Petroleum Relief Programme, the government said it has developed a two-tier pricing programme that would provide relief to two-wheelers (motorcycles), three-wheelers (rickshaws) and small vehicles by dividing the consumers into the categories of “poor” and “rich”.

The programme will target roughly 20 million motorcycles and rickshaws (with a capping of 21 litres of fuel) & 1.36m small vehicles (with a capping of 30 litres of fuel) currently active across Pakistan, the report states.

The government has used information from surveys and car sales data to estimate the number of vehicles currently active.

Using differential pricing wherein the base price of fuel is assumed to be Rs300 per litre, the “poor” will be provided relief of up to Rs50 by charging the “rich” an additional Rs102 per litre.

The resulting assumed prices would be Rs250 for the “poor” and Rs352 for the “rich”.

 A screengrab of a page from the report that details the relief magnitude provided through differential pricing.
A screengrab of a page from the report that details the relief magnitude provided through differential pricing.

The report further says that the programme will use two models for its implementation — an e-discount through OTP and a “fuel card”.

The implementation will be done in three phases with the first being an increment in the base fuel price (Rs300) of Rs75 — setting the new price without relief at Rs375 — and the collection of money in an escrow account.

In the second phase, the government will “use two different registration mechanisms to enrol the beneficiaries”.

One mechanism would involve data being uploaded by the Vehicle Registration Authority to the National Database and Registration Authority (Nadra) while the other would have the consumer register their vehicle via SMS.

In the final phase, the discount will be dispersed to the beneficiary after they have registered on the relevant registration portal and a transaction has been processed at the fuel station.

The Ministry of Energy (Petroleum Division) will supervise the roles and responsibilities of various actors involved in the plan — including Nadra, the Oil & Gas Regulatory Authority, oil marketing companies and the National Bank of Pakistan.

Fuel relief programme plan

While chairing a meeting in Lahore on March 19, Prime Minister Shehbaz Sharif had said that low-income segments — consisting of consumers with motorcycles, rickshaws, 800cc cars and other small vehicles — would be given a subsidy of Rs50 per litre under the petroleum relief package.

Although a day later State Minister for Petroleum Dr Musadik Malik had announced the government will provide petrol at “Rs100 less than the official rate”, the strategy shared today maintains the premier’s announcement of a “relief of up to Rs50 per litre”.

It is pertinent to mention that the International Monetary Fund (IMF) — which has mandated reforms and measures on Pakistan to revive a stalled $6.5 billion IMF loan programme — has not yet been consulted on the government’s recent move.

Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said that the lender’s staff are “seeking greater details on the scheme”.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

One year on

One year on

Governance by the ruling coalition has been underwhelming and marked by growing authoritarianism.

Editorial

Climate funding gap
Updated 17 Feb, 2025

Climate funding gap

Pakistan must boost its institutional capacity to develop bankable climate projects.
UN monitoring report
Updated 17 Feb, 2025

UN monitoring report

Pakistan must press Kabul diplomatically over its tolerance of TTP terrorism.
Tax policy reform
17 Feb, 2025

Tax policy reform

THE cabinet’s decision to create a Tax Policy Office at the finance ministry has raised hopes that tax policy is...
Maintaining balance
Updated 16 Feb, 2025

Maintaining balance

It must take a more proactive approach to establishing Pakistan’s bona fides.
Welcome return
16 Feb, 2025

Welcome return

IT is almost here; the moment Pakistan has long been waiting for — the first International Cricket Council...
Childhood trauma
16 Feb, 2025

Childhood trauma

BEING a child in this society should not be so hard. But recurrent reports of child abuse — from burying girl...