ISLAMABAD, May 24: The government is expected to keep a moratorium on rising oil prices at the current level through budgetary subsidy in view of unsustainable hike in the international market, Dawn has learnt.

Sources in the petroleum ministry said the government has decided in principle to subsidize the price if it continues to rise because a stage has come where it has become unbearable.

"But this does not mean that the deregulation formula has been completely undone", a source said adding the prices would remain constant at current level till such time these are rising and would be reduced as per the formula which is in vogue when these start falling.

He said the decision would not be formally during the current fiscal year in view of government commitment with the international lenders but a relief has already started reaching the common man.

He said the prices did not rise in the previous fortnightly review although it was very much called for in view of hike in the international market. He said the government had to reduce a small percentage of its petroleum development surcharge (PDL) to keep the price constant.

Replying to a question, he said, it would not adversely impact the government's revenue target because it was already close to surpass the petroleum related revenue target owing to continuously rising prices although budget estimates were based on quite lower prices prevailing at the time of budget 2003-04.

The government had projected about Rs61 billion development levies and surcharges on petroleum products and natural gas and the target has almost been met, the official said.

He agreed that deregulation policy had failed in the sense that fortnightly review would not take place in real terms because the prices had touched highest ever limits and could not be allowed to go up further.

He said the government's real problem was discontinuation of the Saudi Oil Facility (SOF) which had a Rs31 billion contribution in the federal budget and it would be an additional burden on the government.