Government Introduces New Mechanism to Lower Petrol Prices by Freezing Refinery Margins

The government has introduced a new mechanism aimed at reducing petrol prices by directing oil refineries to hold the ex-refinery price of Motor Spirit (MS) petrol at its March 7, 2026 level for the next 30 days, according to sources cited by ProPakistani. Any revenue refineries earn above that benchmark during the period will be returned to the government, which intends to channel the funds toward lowering the petroleum levy.

A Petroleum Division letter dated October 30 outlines that premiums, incidental charges, and customs duty embedded in the ex-refinery petrol price will remain frozen at their March 7, 2026 levels for the 30-day window. The import price will be calculated based on Pakistan State Oil's actual import cost, and refineries will be required to deposit the difference between the two prices into the petroleum levy account.

To ensure compliance, refineries must share daily petrol sales data and payment receipts with the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA) for verification. Sources estimate the mechanism will recover approximately Rs. 49 per litre from refineries, with Topline Securities projecting a financial burden of Rs. 10–15 billion per month on the refining sector.

The funds recovered from refineries give the government fiscal room to reduce the petroleum levy, which could translate into lower prices at the pump for consumers. However, the extent of relief will depend on the total amount collected and the government's forthcoming fortnightly price review.

The arrangement is set for an initial 30-day period, after which the government will assess whether to extend it. The move comes as policymakers look for ways to ease fuel costs amid broader economic pressures, though further details on the implementation are expected to be shared in the coming days.