PM unveils plan to cushion fuel shock

Prime Minister Shehbaz Sharif on Sunday announced a special relief scheme offering Rs100 per litre off petrol for motorcycles, three-wheeler rickshaws, and cars up to 800cc engine, in an attempt to shield lower-income consumers from the impact of sharply rising petroleum prices. In this regard, the government has prepared a Rs75 billion fuel relief scheme and the Petroleum Division has circulated a draft summary for the Economic Coordination Committee (ECC), seeking immediate comments from key stakeholders before moving ahead with the scheme. “In this hour of difficulty, we will not leave the public alone. To alleviate the burden of rising oil prices on users of motorcycles, rickshaws, Qingchis, and small vehicles, a special scheme is being initiated,” said a statement issued by the Prime Minister’s Office (PMO). Under the proposal, an estimated 11.8 million beneficiaries will be covered. Around 10 million two-wheeler users and 800,000 three-wheeler users will be entitled to relief on 20 litres of fuel per month, translating into a maximum monthly benefit of Rs2,000 per beneficiary. Another one million users of cars of up to 800cc will receive relief on 30 litres per month, providing them a maximum benefit of Rs3,000 each. The government has estimated the monthly fiscal impact of the scheme at Rs24.6 billion – Rs20 billion for two-wheelers, Rs1.6 billion for three-wheelers and Rs3 billion for cars. The scheme will take effect within the limits of Islamabad from the night between Monday and Tuesday, while it will be implemented across Pakistan, including Azad Kashmir and Gilgit-Baltistan, from the night between Wednesday and Thursday. The Petroleum Division has sought Rs75 billion through a Technical Supplementary Grant (TSG) to finance the scheme for three months. In addition, Rs1.73 billion has been proposed for the Information Technology Ministry to develop and operate the technological infrastructure required for the programme. The proposed relief comes amid a steep increase in domestic petroleum prices following volatility in international oil markets due to the Gulf crisis. Petrol prices have increased by Rs72 per litre, or 24%, between July 1 and September 11, while high-speed diesel rose by Rs87 per litre, or 28%. The government noted that Pakistan’s heavy dependence on imported crude oil and refined petroleum products meant increases in international prices translated directly into higher domestic retail prices. Officials said lower-income consumers were facing severe economic pressure from higher petroleum prices and resulting inflation. Subsequently, the prime minister directed the authorities concerned to devise a mechanism to provide relief to the poorest segments of society. A series of consultations was held under the leadership of deputy prime minister Ishaq Dar, involving the petroleum, finance and IT ministries as well as the State Bank of Pakistan (SBP), Oil and Gas Regulatory Authority (Ogra) and other stakeholders. Fuel Pass System The government, also notified the procedure for obtaining subsidised petrol. It said that applicants should send an SMS containing REG, CNIC number, vehicle registration number, province name and registration date to 9771. Once registration is completed, the applicant will receive a confirmation message. Before going to the petrol pump, the applicants should also send the required information to 771. They will then receive a message authorising them to obtain petrol. The message will specify the quantity of petrol and the period for which it can be used. The applicant can then show the message at the petrol pump and obtain petrol at the subsidised price. The subsidy will be administered through a digital platform called the Fuel Pass System (FPS), which will be deployed and managed by the IT ministry. Registration for the scheme will start from Monday (today). A beneficiary’s CNIC, vehicle registration number and mobile phone number will be used for registration. The relief will be provided to the user of the vehicle rather than its registered owner, while only one vehicle will be allowed per user. The IT ministry will manage beneficiary registration, token issuance and validation and generate reports required for settlement of payments. Under the proposed mechanism, the IT ministry will provide the Petroleum Division with a daily digital record of tokens consumed at individual petrol pumps. The Petroleum Division will subsequently authorise the SBP to make payments to the filling stations. Ogra will provide details of participating dealerships, including their bank accounts and other information required for settlement. The Finance Division will provide funds to the Petroleum Division through the TSG, which will then release the funds upfront to SBP for subsequent payments to participating petrol pumps. The separate Rs1.73 billion allocation sought for the IT ministry will cover FPS software development and deployment, call centres, SMS services, registration and token issuance, validation and settlement modules, third-party verification and other related expenditures. OMCs called for meeting Meanwhile, Ogra has called a meeting of oil marketing companies (OMCs) on Monday (today) to discuss arrangements for implementing the fuel relief scheme at retail outlets and petrol pumps. Chief executives or senior representatives of OMCs have been asked to participate in the online meeting. The regulator has specifically sought discussions on the availability and use of mobile sets at retail outlets and petrol pumps for the fuel subsidy. Under the funds-flow arrangement, Ogra will compile information on petroleum dealerships, including dealership details, their respective OMCs, focal persons and bank accounts. The IT ministry will then generate daily reports showing the dealerships participating in the programme, the number of tokens processed and the amounts payable. On the basis of these reports, the Petroleum Division will advise SBP to transfer funds to individual dealerships. The government has proposed that the scheme be rolled out immediately across the country in phases, depending on the availability of required data. The proposal will require approval of the ECC and ratification by the federal cabinet before the Finance Division releases funds for implementation. (WITH INPUT FROM OUR ISLAMABAD CORRESPONDENT KHALID MAHMOOD)