What happened
The federal government increased the price of kerosene by another Rs40 per litre and approved a Rs23 billion price differential subsidy to keep the prices of petrol and high-speed diesel (HSD) unchanged for the week ending 20 March 2026, according to Dawn’s report on the petroleum division notification. The petroleum division said the prime minister had approved holding the HSD and motor spirit (MS) prices, and that the government would pay price differentials of Rs75.05 per litre on HSD and Rs49.63 per litre on petrol to oil marketing companies (OMCs).
Without the freeze, petrol and HSD would have risen by more than Rs49 and Rs75 per litre respectively with effect from 14 March. The Price Differential Claims (PDC) for 14 to 20 March were estimated at Rs23bn, to be paid by the Oil and Gas Regulatory Authority (OGRA). To fund the payout, the Finance Division obtained cabinet approval to create a “Prime Minister’s Austerity Fund”, while the Economic Coordination Committee cleared Rs27.1bn for the fund, of which Rs23bn is to be transferred to OGRA.
Kerosene, described in the report as “poor man’s fuel”, became the most expensive consumer petroleum product at Rs358 per litre. Its rate rose about 12.6 per cent on 14 March, taking the cumulative increase from Rs188.87 earlier in the month to roughly 90 per cent. Kerosene is used by households in remote areas where liquefied petroleum gas cylinders are hard to obtain, but it is also mixed with petrol for profiteering; officials said the large price gap that encouraged adulteration has now been removed. The petroleum levy on diesel was left unchanged at Rs55.24 per litre, and on petrol and higher-grade fuels at Rs105.37 per litre plus a Rs2.50 climate support levy.
Why it matters
The decision tries to insulate motorists and transport-dependent businesses from a global oil shock while letting the price of kerosene, a fuel used mainly by poorer households, rise sharply. It also shifts the cost onto public finances at a time when Pakistan is under an International Monetary Fund programme and running large subsidies; the creation of a dedicated austerity fund indicates the government intends to bankroll the gap from spending cuts rather than a new levy. The gap between the frozen pump prices and the import cost is now being carried by OGRA through payments to OMCs, a mechanism that will come under strain if global prices stay elevated. Petrol and diesel prices had earlier been lifted by Rs55 a litre from 7 March as war disrupted oil supply.
What remains uncertain
It is not clear how long the government can sustain the price differential payments or how large the fund will need to grow if oil prices remain high beyond the current week. The notification covers only the week ending 20 March, and the next review could change the petrol and diesel prices. Officials have not said whether the austerity funding will require further cuts to public spending or additional borrowing.
