Minister shares strategy on subsidised fuel pricing

ISLAMABAD:

Minister of State for Energy (Petroleum Division) Musadik Masood Malik on Wednesday said that the government will finance the fuel subsidy by charging Rs50 more per litre on petrol from the affluent to provide relief to the low-income segment.

In a media briefing detailing the strategy on Prime Minister’s Petroleum Relief Programme for low-income population, the state minister said that the government would make petrol expensive for the rich and cheaper for the poor.

The higher prices paid by the rich will be used to provide petroleum subsidy to low-income people, therefore, the IMF (International Monetary Fund) should not have any objection,” he maintained.

Around 51 per cent of the population would benefit from the discounted fuel pricing programme, which uses 60 per cent of the total fuel consumed in the country.

The programme will target roughly 20 million motorcycles and rickshaws (with a capping of 21 liters of petrol) and 1.36 million small vehicles (with a capping of 30 liters of fuel), he said.

Meanwhile, Malik said the strategy to provide subsidy of Rs100 per litre on petrol to motorcycles, rickshaws and up to 800 cc cars will be finalised in six weeks and submitted to Prime Minister Shehbaz Sharif for approval.

Malik said the proposed two-tier pricing strategy would aim at taxing luxury cars owners Rs50 per litre.

The government intends to fund the subsidy by charging an additional fee of Rs50 for every liter of petrol bought by the luxurious car owners.

Explaining the mechanism, the minister said that the Oil and Gas Regulatory Authority (Ogra) would determine the two different prices for rich and poor.

For example if petrol price is Rs300 per litre, the rich will pay Rs50 per litre extra and will be charged Rs350 per litre, he said.

Rupees 50 per litre charged from the rich consumers will be transferred to the targeted poor consumers and they will get petrol at Rs250 per litre, he added.

This is a purely Petroleum Division initiative and other line ministries and divisions have not been involved in it due to the limited timeframe for finalising recommendations on PM’s fuel relief package.

When asked what kind of legal assistance was being provided to the proposed relief package, as people may move courts against the price discrimination, the minister replied, “We have foreseen no court cases in the two-tier tariff by rich”.

He further said that Ogra would review the fuel pricing fortnightly, adding that additional fuel price charged from the rich would be deposited by the oil marketing companies (OMCs) in a dedicated escrow accounts in the National Bank of Pakistan, which would later be disbursed to the petrol pumps.

He maintained that the collections would be audited and the beneficiaries’ data will be collected from provincial vehicles registration authorities. Subsequently, a message (OPT) will be sent on consumers’ phone numbers.

The fuel discount facility will be available at 12,000 OMCs outlets.

It has been proposed that each motorcyclist would get two to three litres of petrol everyday whereas five to seven litres of fuel would be provided to a small car owner daily.

To a question that finance ministry had opposed the petrol relief package, the state minister replied in negative.

He was asked whether it was an injustice that an old 1500cc car which costs around Rs1.5 million would be charged Rs50 per litre extra whereas a new 660cc car that costs around Rs3.2 million would be given the relief.

Malik replied that in the first phase they would give blanket relief to the owners of up to 800cc cars, while in the second phase they will consider the value and models of the cars.