ISLAMABAD, Oct 20: The government has decided to freeze the prices of petroleum products at current levels for at least next three months to generate a sum of Rs20bn payable to the oil marketing companies (OMCs) against their price differential claims.

Informed sources told Dawn on Friday that the local POL prices would remain unchanged in case their prices either remained at present level or scale down in the international market.

However, if the prices register any increase then it would be passed on to the consumers.

The sources said that the finance ministry wizards had informed the prime minister that if the amount payable to the OMCs was not generated through freezing the prices it would be difficult for the government to achieve the desired level of budget deficit.

An amount of Rs48 billion were payable by the government to the OMCs against their price differential claim during May 2004 to October 2006.

This means that the government committed this amount as subsidy to the OMCs for selling the petroleum products at lower price to provide some relief to consumer. The government has so far paid out Rs28 billion to the OMCs.

An official in the finance ministry told Dawn that besides price differential claim the government also lost Rs35 billion as petroleum development levy (PDL) during the same period under review.

He said that during the budget last it was decided that the PDL would no more be treated as revenue but it would be used for offsetting the prices of diesel, kerosene in the domestic market.

Answering a question he said that the government would have to cut down the development spending or borrow money in case it fails to generate Rs20bn by keeping POL prices unchanged.

“This situation may create problems for the government to achieve budget deficit target and it will also affect the country’s credit ratings,” he added.

An official in the petroleum ministry told Dawn that during May 2004 to October 2006 the government raised prices of petroleum products nine times while kept them unchanged for 26 months.

He said that following the government decision to link domestic POL rates with international prices since 2001, the petrol price had been increased 46 times, decreased 23 times and remained unchanged for 58 times.

Similarly, the price of diesel had been enhanced 43 times, scale down 23 times and remain unchanged for 61 times.