Govt goes ahead with petrol subsidy scheme

Contrary to assurances given to IMF, summary moved for approve from ECC

Shahbaz Rana April 19, 2023
The summary shows that the government has planned to collect up to Rs75 per litre additional amount from consumers. PHOTO: File.


Contrary to the assurance given to the International Monetary Fund (IMF) of shelving the petrol subsidy scheme, the government has moved a summary for a relief package for motorcyclists and small vehicle owners.

In February, Prime Minister Shehbaz Sharif gave go ahead to petrol subsidy to motorcyclists and car owners of up to 800 cc vehicle by charging Rs50 per litre higher price from lower middle income to rich class owning vehicles of above 800 cc.

According to Energy Ministry sources, the Petroleum Division has circulated the summary for approval of the Economic Coordination Committee (ECC) of the Cabinet. The summary has been moved after Shehbaz finalised the “concept” of the proposal.

The summary shows that the government has planned to collect up to Rs75 per litre additional amount from consumers, who are already struggling to pay a record-high price of Rs282 per litre.

The scheme has been criticised by many who say that the government is throwing its social responsibility onto the shoulders of people, who are already crushed by the 50-year high inflation of over 35% and an all-time high food inflation of 46%.

Critics say that the owner of a 1000cc taxi, valuing at less than Rs1 million, will also be forced to pay up to Rs75 per litre extra as subsidy for an expensive 660cc small car, having value of around Rs3 million.

The scheme is seen as a political stunt by the ruling alliance to support its fast-dwindling popularity among the people. The IMF has also raised suspicions about the possible impact of the scheme on the budget and misuse of the scheme.

The sources said that in a meeting with the IMF deputy managing director Pakistan assured that the government did not have the plan to implement the subsidy scheme. The Ministry of Finance held the consistent view that the scheme was still being finalised.

Contrary to these assurances, in March, the Petroleum Division has moved the summary to seek the ECC approval. The prime minister, who is also the minister for petroleum, has authorised the submission of the summary to the ECC.

Details showed that the Petroleum Division submitted the summary after consulting “different stakeholders, including Pakistan State Oil”. The final concept was also presented to the prime minister on March 20, and the prime minister directed for sending the matter to Cabinet for consideration.

The Petroleum Division’s reply was awaited till the filing of the story.

All this happened much before Pakistan told the IMF that the scheme was not yet prepared. Such statements widened the trust deficit between Pakistan and the IMF.

Around 20 million motorcycles, rikshaws and 1.36 million cars below 800cc across Pakistan were the targeted segment, according to the Petroleum Division’s estimates.

The Petroleum Division has sought the ECC’s approval for providing 21 litres per month of subsidised fuel to motorcyclists and 30 litres per month to cars below 800cc engine capacity.

These consumers account for 51% of the total monthly consumption -- a figure that may rise once the scheme is enrolled due to subsidised fuel.

The Petroleum Division has requested the ECC that motorcycles, rickshaws and small cars may be provided with a relief of Rs25 to 75 litre by incrementally increasing the price of petrol for privileged richer consumers' cars over 800cc.

The net per litre benefit will be Rs125 compared to the price a lower middle-income group or rich driving a Mercedes will pay. The remaining Rs25 per litre will go into the pockets of the NBP and other agencies involved in the execution.

According to the proposal, the OGRA will advise the incremental price for cars over 800 CC and discounted petrol prices for motorcycles, rickshaws and small cars in its fortnightly pricing summary for submission to petroleum and finance divisions.

The scheme is proposed to be implemented through One-Time-Password (OTP) mechanism. The government has proposed to collect the funds in the National Bank of Pakistan (NBP) account.

The price of petrol will be increased over and above the base price. The Oil Marketing Companies (OMCs) will sell petrol at a higher price to consumers other than the target segment at fuel stations.

The MCs will realise the incremental price from fuel stations and deposit the same into the National Bank of Pakistan’s designated bank account operated by the Finance Division.

The registered beneficiaries will get petrol at a discounted rate. The registration of beneficiaries and petrol pumps will be done through NADRA. The applicant will register on NADRA’s registration portal. The beneficiary will generate OTP and visit fuel station.

The pump attendant will enter OTP, CNIC and transaction details in mobile application. There are also questions why would the pump owners depute extra human resource for the success of the scheme without having any additional benefits.

The transaction will be routed through the NBP/ Bank for OTP verification and relief calculation. The beneficiary will pay the discounted price, fuel station settles POS and submit claims to Bank. The bank will settle amount to fuel stations the next day.

Implementation of the scheme will be administered by a Task Force chaired by the Minister of State for Petroleum Dr Musadiq Malik. There will be a governing board that will meet twice a month and the minister of state for petroleum will be its chairman.

The members will include petroleum division secretary, BISP secretary, OGRA chairman, NADRA chairman, provincial chief secretaries, NBP President and PSO managing director.

A steering committee has also been proposed that will comprise officials from the Petroleum Division, OMCs, NBP and NADRA.

In the first phase, the petrol price will be increased to an estimated Rs370 per litre, including Rs75 for the relief. Non-beneficiary will purchase petrol at Rs75 per litre, which will bring the availed relief to Rs125 by a motorcycle owner and a car owner. The Rs25 per litre will go to the NBP and NADRA for administrative costs.


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