Govt approves new petroleum pricing mechanism

July 20, 2026 (MLN): The federal government has approved a revised pricing mechanism for petroleum products, aimed at minimizing the impact of rising international petroleum prices on consumers, with the new framework to take effect immediately, according to a Government of Pakistan, Ministry of Energy (Petroleum Division) letter.

Under the mechanism, the FOB price for both Motor Spirit (MS) and High-Speed Diesel (HSD) will be computed on a seven-working-day rolling average of the published Platts Arab Gulf assessments for MS 92 RON and HSD 10 ppm, with the price to be announced daily by the Oil and Gas Regulatory Authority (OGRA). The price will remain unchanged on Saturdays and Sundays.

For MS, where import has taken place during the rolling seven-day window, the weighted average of actual premiums, incidentals and customs duty of Pakistan State Oil's (PSX: PSO) imported cargoes will be applied.

In case of no MS import by PSO during that period, the calendar year-to-date average of premium, incidentals and customs duty, effective from January 1, will be used instead.

Further, where a long-term supply arrangement is concluded between PSO and a foreign supplier, the premium under such an arrangement will be applied for MS pricing in the absence of imports during the last seven working days, similar to the arrangement already in place for HSD under the Kuwait Petroleum Corporation (KPC) contract.

For HSD, where import has taken place, the average of actual premiums, incidentals and customs duty of PSO's imported cargoes will be applied in the same manner as MS.

Where no HSD import has been made by PSO in the last seven working days, the KPC term-contract premium will apply, while incidentals and customs duty will be based on the calendar year-to-date average.

On daily price publication, OGRA will compute and publish ex-depot prices of petroleum products daily on its official website without requiring approval from the federal government or the prime minister, with the DG Oil Office to be intimated of each publication.

The petroleum levy rate will not exceed the upper limit prescribed by the cabinet, with applicable rates for the fiscal year to be advised by the Finance Division, which will also be consulted on any in-year revisions.

OGRA will publish the Platts daily announcement for MS-92 RON and HSD 10 ppm on its website with effect from July 1, 2026, to ensure transparency and full market visibility of the reference benchmarks.

Among other parameters, HSD imports will be allowed only through PSO for FY2027, while MS imports will be allocated to oil marketing companies (OMCs) by OGRA through the Product Requirement Mechanism (PRM) based on their MS market share for prior months, with a minimum import parcel size of 10,000 metric tons.

Any default in MS import commitments, delays beyond the agreed month of delivery, or default in committed uplift from refineries will result in disqualification from further import allocation for nine months.

All other parameters, including exchange rate adjustment, Refinery Regulatory Duty, Research Octane Number, HSD sulphur penalties and IFEM settlement, will remain applicable as per existing practice, while OGRA has been tasked with developing detailed and transparent operating procedures for implementing the mechanism.

The pricing of Superior Kerosene Oil (SKO) and Light Diesel Oil (LDO) will also be determined daily on the basis of a seven-working-day rolling average of the published Platts Arab Gulf assessments, with other parameters remaining unchanged.

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