Islamabad: The government is unlikely to operationalise the recently created Petroleum Prices Stabilisation Fund (PPSF) and instead plans more changes to the pricing mechanism, including complete deregulation of petrol by June 2027, with high speed diesel to follow at a later stage.

A meeting of the committee on petroleum pricing, led by petroleum minister Ali Pervaiz Malik, also agreed in principle to empower the Oil and Gas Regulatory Authority (OGRA) to switch diesel pricing to crude based calculations in case of an unusual rise in the diesel crack spread without seeking repeated approvals from the federal cabinet.

The cabinet had last month temporarily capped the diesel crack spread — the gap between international diesel and crude oil prices — at USD 41.89 per barrel after it averaged above USD 60, resulting in windfall gains for local refineries and sharp increases in their profitability and share prices.

Once approved, OGRA would be able to adjust the diesel spread within a prescribed 'floor and cap' mechanism.

“For diesel pricing, the committee approved the guiding principles for possible rules-based intervention in case of an emergency situation, with clearly defined price shock triggers and possible corrective measures,” the petroleum division said in a statement.

For consumers, deregulation could mean more frequent changes in petrol prices and, eventually, different prices across oil marketing companies as they compete in the market. It could offer cheaper options in some cases but would also expose consumers more directly to movements in international oil prices and the exchange rate.

In a subsequent phase, diesel pricing would also be considered for complete deregulation, allowing oil marketing companies to adjust prices in a competitive environment.

The petroleum division said the committee had agreed on a set of recommendations to strengthen the existing pricing mechanism and would submit its final report to the prime minister for consideration and approval.

Informed sources said some additional technical input was still required and the process was expected to be concluded in another two or three committee meetings.

The committee also reviewed recommendations on the petrol pricing formula and set a likely June 2027 target for deregulation, with the aim of ensuring a gradual transition towards competitive, market based pricing while protecting consumers from excessive price volatility.