Pakistan’s Petrol Relief scheme faces uncertainty as the government and International Monetary Fund remain divided over fuel subsidies.
The disagreement also involves Pakistan’s growing gas-sector circular debt. According to the provided information, the IMF wants Pakistan to move away from broad fuel subsidies.
The lender has instead supported a targeted mechanism for providing assistance to eligible consumers. However, the government is not ready to immediately withdraw compensation for motorcycles and small vehicles.
The programme’s continuation beyond its initial three-month period remains uncertain.
Petrol Relief Scheme Could Cost Over Rs75 Billion
Officials estimate that the three-month Petrol Relief programme could cost more than Rs75 billion.
Pakistan has also provided the IMF with a detailed breakdown of petrol pricing. According to the figures, imported petrol costs around Rs250 per litre before taxes and margins.
Consumers are paying approximately Rs390 per litre.
The pricing structure reportedly includes nearly Rs110 per litre in taxes.
Various margins add another Rs27 per litre to the overall price. The IMF has raised objections to fuel subsidies and cross-subsidies.
It has instead called for financial assistance to be delivered through targeted support.
Gas Circular Debt Reaches Rs3.6 Trillion
The disagreement also extends to Pakistan’s gas sector.
Gas-sector circular debt currently stands at around Rs3.6 trillion, according to the provided figures. Pakistan and the IMF also remain divided over approximately Rs1.4 trillion in gas-sector receivables.
The IMF has supported writing off certain receivables linked to delayed payments.
Pakistan has raised concerns about the impact on gas distribution and exploration companies.
The government proposed settling debt through tariff differential claims involving Sui gas companies. Major state-linked energy companies could also become part of the proposed settlement.
These include OGDCL, PPL and GHPL.
IMF Raises Concerns Over Dividend Proposal
Another proposal involves using around Rs850 billion in additional gas-company dividends.
The government considered using these funds to reduce outstanding circular debt.
However, the IMF reportedly questioned whether the proposal would remain fiscally neutral. The Petroleum Division argued that policy-driven obligations contributed significantly to the circular debt.
These obligations prevented Sui companies from fully recovering their costs. Officials have also considered petroleum levy revenues and potential savings from LNG arrangements.
The IMF questioned whether some proposed funding sources could provide sustainable financing.
Concerns were also raised about possible effects on minority shareholders and other stakeholders.
Future of Petrol Relief Remains Uncertain
A detailed meeting on the gas-sector circular debt management plan is expected next week.
For now, the future of the Petrol Relief programme remains unresolved. The treatment of gas-sector receivables and circular debt is another outstanding issue.
The IMF has acknowledged progress in some gas-sector reforms, according to the provided information.
These include efforts to reduce unaccounted-for gas and limit the accumulation of new debt.
In other news read more about: Pakistan Collects Rs99 Billion Extra From Petroleum Levy Ahead of IMF Review
Further discussions will determine whether Pakistan modifies its fuel relief programme or continues it under a different mechanism.
