The federal government has agreed in principle to widen its targeted petroleum subsidy to cover diesel and up to five million additional beneficiaries.
The understanding followed talks between Prime Minister Shehbaz Sharif and Jamaat-e-Islami (JI) chief Hafiz Naeem ur Rehman at the PM House. If the technical committees of both sides build on the emerging consensus, eligible beneficiaries could get petroleum products Rs. 30 to Rs. 40 per litre cheaper.
The type of subsidy was the main point of disagreement. The government maintained that targeted relief is necessary under the International Monetary Fund (IMF) program, arguing that a blanket subsidy could put the programme at risk and would benefit wealthy and low-income consumers alike.
It offered to add up to five million consumers to the existing petrol subsidy scheme and is considering bringing more older models of motorcycles and vehicles under the programme.
JI insisted that diesel must also be covered, saying agriculture and other key sectors rely heavily on it and that excluding it hurts farmers and raises costs across the economy. In response, the government indicated that diesel could be included in the targeted programme to an appropriate extent.
Sources added that the government has already cut the price of locally produced diesel by Rs. 32 per litre by delinking it from international prices, following pressure and negotiations by JI.
In a meeting, the prime minister and the JI chief decided to form a joint committee to recommend proposals for expanding the ongoing fuel subsidy scheme. The committee will have six members, three each from the government and JI, and will submit final recommendations on two issues:
- Widening the ongoing petrol relief scheme so that the largest possible number of eligible people can benefit
- Drawing up workable budget proposals for a phased cut in the petroleum levy
The PM House said Deputy Prime Minister and Foreign Minister Ishaq Dar, Planning Minister Ahsan Iqbal, and the PM’s political adviser Rana Sanaullah will represent the government on the committee.
Both technical committees will continue working on the framework. The final scope, eligibility criteria, and subsidy amounts will depend on the outcome of these talks.
