ISLAMABAD, Sept 27: The government has decided not to increase petroleum prices till Eidul Fitr to avoid burdening people, already hard-pressed by spiralling prices of daily essentials.

Informed sources told Dawn on Monday that Prime Minister Shaukat Aziz had directed the authorities concerned to continue offsetting the impact of increases in international oil market by extending 'regular subsidies'.

The oil prices in Pakistan remained unchanged since May this year despite an unprecedented rise in world oil prices which at one point touched 50 dollar a barrel mark.

"We cannot take the risk of increasing petroleum prices at this stage as it will hurt the people and the issue could be exploited by the opposition," said a senior official.

He said that already subsidy worth billions of rupees had been extended to avoid upward revision in oil prices. "Perhaps it would be difficult for the government to enhance oil prices even after Eid," he said, expressing the hope that these prices will stabilize in the world market after some time. The practice of allowing oil advisory committee to adjust prices will be restored after that.

The sources said that countries like Saudi Arabia had largely improved their worsening financial position through unprecedented oil price increases in the wake of continuing Iraq war.

The effects of oil price increases, the sources said, would be passed on to the common man 'gradually', maybe after December 2004. The government has been maintaining that it would pass on the impact to consumers in case prices maintained a higher pace.

The Asian Development Bank (ADB), in its latest assessment of the Pakistani economy, said that a recent upturn in global inflation, particularly the large increase in oil prices, will put pressure on domestic prices in Pakistan.

It said that with economic recovery gaining further momentum, inflation in Pakistan is expected to rise further during 2004-05. Also, with money supply having increased at a significantly higher rate than increase in nominal GDP in the last three years, price increases are likely to become more generalized during the current financial year.

In addition, most industries are now operating at a near-full capacity, and therefore, excess capacity, which earlier served as a dampener on prices, will not be there.