Pakistan revises petrol pricing formula to pass war-time premium relief to consumers

ISLAMABAD — Pakistan has changed the way petrol prices are calculated. The federal cabinet approved a revised pricing mechanism for motor spirit — petrol — on October 30, and the Petroleum Division has since issued separate notifications to the Oil and Gas Regulatory Authority (OGRA) and to oil refineries. The new formula took effect on November 2 and will run, initially, for 30 days.

Under the revised formula, the import price of petrol will now be set on the actual import cost of the relevant Pakistan State Oil (PSO) cargo. If that cost is unavailable for a given day’s pricing, the premium, incidentals and customs duty of the last available cargo may be used instead.

For local refineries, the arrangement is temporary but strict: for the next 30 days, the premium, incidentals and customs duty built into their ex-refinery price will stay fixed at the levels in force on March 7, 2026 — before the Iran-US war. Anything above that benchmark, they cannot keep.

According to OGRA’s letter, refineries must surrender Rs49.02 per litre into the petroleum levy account — the gap between the notified import price and the entitled ex-refinery price. Spread across national volumes, that works out to a contribution of Rs14.71 per litre toward the Rs80 per litre petroleum levy. Oil marketing companies will therefore be charged Rs65.29 per litre in levy, and the benefit is to reach consumers exclusively through a corresponding cut in the retail petrol price. The Rs80 levy itself has not changed.

Officials say the prices announced on October 30 were already calculated under the new formula, and that it headed off a major increase. Petroleum Minister Ali Pervaiz Malik said more than 12 to 13 million deserving people are being supplied subsidised petrol at pre-war prices.

The change closes a windfall built into the old system. Until now, OGRA priced even locally refined petrol on an import-parity basis — so fuel refined in Karachi or Rawalpindi from crude was priced as though a ship had brought it from the Gulf. When the war pushed the PSO premium to US$25.52 a barrel by October 30, local refineries collected that same inflated premium without bearing any extra cost. The new formula takes that difference back.

Refineries have pushed back hard. Attock Refinery chief executive Adil Khattak told the government the decision costs refineries about Rs35 a litre from pre-war premiums and incidentals, plus about Rs14 a litre diverted from customs-duty recovery — roughly Rs49 a litre in all. He warned it undermines the Brownfield Refineries Upgradation Policy, under which four refineries signed upgradation agreements on September 24, 2026, with PARCO expected to follow, representing an estimated US$5–6 billion in investment.

The formula applies to petrol only; pricing parameters for diesel and other products are unchanged. After 30 days, the government will review the financial impact and decide whether to extend it.