Govt May End Petrol and Diesel Price Freeze as Fuel Prices Surge

The federal government is considering ending the freeze on petrol and diesel prices as they rise sharply and fall behind global benchmarks.

At the same time, officials are looking at giving targeted subsidies to owners of two and three-wheelers to help low-income consumers.

Since early March, jet fuel prices have surged nearly 150% and kerosene about 127%, reflecting volatility in global energy markets following the US–Israel war on Iran.

Petrol and diesel prices were frozen after an earlier increase of Rs. 55 per litre each, with the government allocating about Rs. 69 billion in subsidies to offset subsequent adjustments. Officials said the state is currently absorbing roughly Rs. 175 per litre on diesel and about Rs. 75 per litre on petrol to maintain retail prices.

The freeze may be difficult to sustain as Pakistan’s programme reviews under the International Monetary Fund (IMF) remain pending and fiscal pressures intensify. Officials warned that delaying price adjustments risks building inflationary pressures later.

A special cabinet committee formed by Prime Minister Shehbaz Sharif reviewed the widening divergence between domestic and international fuel prices and discussed replacing broad price controls with targeted subsidies for two- and three-wheelers.

Authorities said petroleum inventories remain adequate, supported by secured imports for March and April and steady refinery output, with supply chains functioning normally nationwide.

Rising jet fuel costs are already feeding through to airfares. Aviation officials estimate ticket prices have increased by Rs. 10,000 to Rs. 15,000 on domestic routes and by Rs. 30,000 to Rs. 40,000 on international travel as airlines pass on higher fuel expenses, which typically account for 30% to 40% of operating costs.

The impact has been compounded by disrupted regional airspace, forcing carriers onto longer routes and raising operating costs further. Since the escalation of tensions in the Middle East, about 325 flights by Pakistani airlines — including roughly 200 operated by Pakistan International Airlines — have been cancelled, according to a spokesperson for the national carrier.

While base fares remain unchanged, fuel surcharges ranging between $10 and $100 have been introduced on some routes. Passenger traffic from the Gulf has weakened, though travel from Saudi Arabia and the United Arab Emirates remains comparatively strong.

Exporters are also feeling the pressure. The Pakistan Fruit and Vegetable Exporters Association said ground handling companies have imposed additional charges of Rs. 50 per kilogram on air cargo shipments, warning the increase could disrupt perishable exports if fuel costs remain elevated.