The federal government has changed the petrol pricing formula for the next 30 days, cutting the petroleum levy on petrol by Rs14.71 per litre and making local refineries absorb the higher cost of imported fuel, so that the pressure from the Iran-US conflict on global oil markets does not reach the pump.
The change was approved by the federal cabinet, after which the Petroleum Division issued revised instructions to domestic refineries in a letter dated October 30. Under the new arrangement, the petroleum levy on petrol has been reduced from Rs80 to Rs65.29 per litre. The government has said that any benefit arising from the levy adjustment will pass only to petrol consumers through lower or stable retail prices.
What the New Petrol Pricing Formula Says
Under the revised petrol pricing formula, the import price of petrol will be worked out on the basis of the actual landed cost of Pakistan State Oil (PSO) cargoes. When actual cost data is not available for daily pricing, the premium, incidental charges and customs duty of the most recent PSO cargo will be used instead.
At the same time, the key components of the refineries’ own ex-refinery price, including premium, incidentals and customs duty, have been frozen at the levels of March 7, 2026, the reference date set before the conflict pushed up shipping and insurance costs. The arrangement will stay in place for 30 days.
Refineries must deposit the difference between the PSO-based import price and their frozen ex-refinery price into the petroleum levy account. They also have to submit daily reports on their domestic petrol sales, along with payment receipts and challans, and the Oil and Gas Regulatory Authority (OGRA) will verify the levy payments together with the Petroleum Division.
Why the Government Made the Change
Import premiums and freight on petrol have risen sharply because of the conflict in the region. According to market estimates, they climbed to $25.52 per barrel from $19.88, adding about Rs14.71 per litre to the cost of imported petrol. Instead of passing this increase to consumers, the government has offset it through the levy cut and shifted the gap to the refineries.
Local refineries supply about 30 per cent of the petrol sold in Pakistan, while the rest is imported. Analysts estimate the effective burden on petrol sold by local refineries at about Rs49 per litre, and the cost to the refining sector at roughly Rs10 billion to Rs15 billion a month.
Refineries Raise Objections
Refinery executives have opposed the decision, saying it was taken without proper consultation and could push their gross refining margins into negative territory. They argue that the move undermines the Brownfield Refineries Up-gradation Policy, under which a share of customs duty proceeds was meant to go into dedicated accounts for refinery upgrades, and warn that sudden policy changes could discourage foreign investment in the sector.
Current Petrol and Diesel Prices
| Fuel | Price per litre | Last change |
|---|---|---|
| Petrol | Rs377.91 | Unchanged |
| High-speed diesel | Rs402.96 | +Rs2.29 |
In the latest revision, the government kept the petrol price unchanged at Rs377.91 per litre and raised the price of high-speed diesel by Rs2.29 to Rs402.96 per litre. The new petrol pricing formula applies only to petrol, so diesel prices will continue to move with the regular pricing mechanism.
How the Petrol Pricing Formula Affects You
- Motorists and motorcyclists: the main aim is to stop petrol prices from rising during the next 30 days despite higher global costs.
- Transporters and farmers: diesel is not covered, so goods transport and farm costs remain exposed to price changes.
- Government revenue: the levy cut reduces income from petrol, but part of it is recovered from refineries through the levy account.
- Refineries: margins will come under pressure, and the industry is likely to push for a review when the 30-day period ends.
What Happens Next
The petrol pricing formula will be reviewed after 30 days. Its final effect on pump prices will depend on global oil prices, the cost of PSO cargoes and how the conflict develops. Daily price notifications from the government will show whether the change leads to an actual cut in petrol prices or only prevents increases.
For official updates, visit the Oil and Gas Regulatory Authority website.
Read More: Petrol Price Cut by Rs3.19, Diesel Up Rs2.25
Follow the TaazaTaren channel for the latest updates.
