As petroleum prices continue to fluctuate, Pakistan has set up a Petroleum Prices Stabilisation Fund (PPSF), to alleviate constant shocks to consumers.
Pakistan has created a Petroleum Prices Stabilisation Fund to help cushion consumers from sharp fuel price fluctuations, as global oil markets remain volatile following the recent conflict in West Asia.
The fund is designed to absorb some of the financial impact of sudden increases in global crude oil prices so that retail petrol and diesel prices do not rise as sharply.
A notification issued by the Ministry of Finance said, “All proceeds received in the name of the Petroleum Prices Stabilisation Fund will be credited to the Public Account of the Federation under the major head ‘Special Deposit Fund’.”
Framework not finalised
The operational framework for the fund is still being finalised. The financial division clarified in the notification that the operational procedures for governing the fund will be jointly worked out by the Finance Division, Petroleum Division, and the Oil and Gas Regulatory Authority (OGRA), and it will be operationalised only after getting the necessary approvals.
The move comes after weeks of volatility in global crude oil prices following the recent conflict involving the United States, Israel and Iran, which briefly pushed oil prices sharply higher. While Pakistan’s government had secured a few cargos directly through special diplomatic efforts, this fund has been handled on an ad hoc basis using administrative powers, instead of a formal legal framework.
Pakistan news agency Dawn’s sources said while there are no current deposits in the fund, it has been set up to take advantage of any future opportunities. They also said that all funds already built up over the past few months, or those which would be provided via any future austerity measures, could be credited to the fund. These resources would then be used to minimise the weekly petroleum price shocks for consumers.
The Pakistani government may look at alternate funding sources for the coming fiscal year, due to the financial restrictions imposed under the IMF program. However, some amount of money could still be set aside to stabilise the prices of POL (petroleum, oil, and lubricants).
In some cases, imports from the US, Russia and Iran, or specialised storage at warehouses, can give discounted prices in comparison to the standard imports from the Middle East. The benefits accumulated from such transactions will allow the fund to stabilise the prices, rather than letting the oil-importing companies and refineries obtain them directly.
