Govt may have to ‘unfreeze’ fuel prices amid global surge

• Targeted subsidy for two-, three-wheelers on the anvil• Jet fuel, kerosene prices rise quietly, but dramatically• Rising jet fuel costs push up domestic, international fares by 30-40pc• Passenger volumes on Gulf routes drop; Europe-bound travellers face limited routes, exorbitant prices• Exporters sound alarm over rising air cargo rates

ISLAMABAD: Amid a sharp rise in jet fuel and kerosene prices, the government is considering unfreezing prices of other petroleum products to reflect global trends, while introducing targeted subsidies for two- and three-wheelers.

While petrol and high-speed diesel prices have been kept unchanged in recent weeks, the rates of jet fuel (JP-1) and kerosene have been increased without formal announcement.

Official rates seen by Dawn suggest JP-1 prices were raised by Rs84 per litre, or 21.65 per cent, to Rs472 from Rs388 per litre with effect from March 21. Since March 1, the price has surged by nearly 150pc from Rs190 per litre.

Similarly, kerosene prices increased by Rs71 per litre, or about 20pc, to Rs429 per litre from Rs358 per litre within a week. Since early March, kerosene prices have risen by 127pc, reflecting global energy market volatility following the US-Israel war on Iran.

On the other hand, the government froze petrol and diesel prices after an initial increase of Rs55 per litre each, allocating around Rs69 billion in subsidies to offset subsequent price revisions.

While the government has protected its petroleum levy targets on both products, it has diverted funds from development projects and emergency funds for natural disasters to maintain prices during Ramazan.

Officials said the government is currently absorbing about Rs175 per litre in diesel costs and around Rs75 per litre in petrol.

Officials said the freeze could not be sustained for long while the review of two IMF programmes had been held in abeyance for more than two weeks now.

“You cannot postpone inflation artificially for long; the more you delay price adjustments, the greater pain you build for the future,” an official said.

It was in this background that the government said it is “actively evaluating price divergence between international and domestic markets to support balanced and timely policy calibration”.

The statement followed a meeting of a special cabinet committee, formed by the prime minister to monitor petroleum prices and review the energy supply........

© Dawn Business