Provinces Oppose Sharing Fuel Subsidy Burden

Provincial governments of Punjab and Sindh have expressed reservations regarding the federal government’s proposal for a Rs200 billion fuel subsidy, advocating instead for the direct pass-through of rising international petroleum prices to end consumers.

During a consultative session, Muhammad Aurangzeb informed provincial representatives that the federal government has already mobilised approximately Rs160 billion through reductions in development expenditures and austerity measures. He further proposed that provinces contribute additional funding, with indicative allocations of Rs102 billion from Punjab, Rs60 billion from Sindh, and approximately Rs30 billion and Rs20 billion from Khyber Pakhtunkhwa and Balochistan, respectively.

Provincial stakeholders raised concerns regarding the economic rationale of maintaining subsidised fuel prices while simultaneously encouraging reduced consumption. Data presented by the Petroleum Division indicated that fuel consumption in March has increased significantly on a year-on-year basis.

The meeting also examined contingency planning in light of prolonged geopolitical tensions in the Middle East. Proposed measures included fuel rationing, potential lockdowns, extended public holidays, and reduced working days. However, Khyber Pakhtunkhwa opposed lockdown measures, citing potential adverse impacts on daily wage earners and private sector activity.

Participants reached a preliminary consensus on introducing a targeted subsidy mechanism for motorcyclists, limiting subsidised fuel to 20 litres per month, with consumption beyond this threshold subject to market pricing. The proposed system will be administered through a mobile application, integrating CNIC data with vehicle registration records.

To facilitate implementation, the Ministry of IT and Telecommunication has initiated procurement processes for approximately 24,000 smartphones to be deployed across 12,000 fuel stations nationwide.

Provincial representatives also highlighted ongoing fiscal constraints. Punjab referenced significant expenditures exceeding Rs100 billion on flood relief, while Sindh emphasised the importance of price signals in promoting energy conservation.

Muhammad Aurangzeb reiterated the need to balance fiscal prudence with targeted public relief, underscoring the importance of responsible consumption amid current economic challenges.