ISLAMABAD, June 14: The government will automatically pass on any increase in world oil prices to domestic consumers from next month, and phase out subsidies entirely by the end of 2008, a senior official told Reuters on Saturday.

The government overshot a budget allocation of Rs15 billion for subsidies by a whopping Rs160 billion in the past year because it failed to pass on any increases when oil prices doubled during the period.

The government official said that because of the subsidies consumers were paying the equivalent of $70 for a barrel of crude, almost half the prevailing international market price.

“Starting by July 1, 2008, consumer fuel prices will be increased periodically over and above the international price increases, to reach parity between domestic and international prices by end December 2008,” the official said, requesting anonymity.

The government is currently paying the following oil subsidies based on per litre average international prices for petroleum products in May: Rs44.11 on kerosene, Rs37.07 on high speed diesel, Rs33.65 on light diesel oil, Rs7.15 on motor spirit, and Rs4.37 on high octane blending component.

It is also aiming on slashing electricity subsidies given to the Water and Power Development Authority to Rs3 billion in 2008-09 from the current Rs21.3 billion.—Reuters