Pakistan is to pass the burden of rising prices onto consumers from July 1, the start of fiscal 2008-09, and will end power sector subsidies by the end of June 2009, it was reported Tuesday.
"Starting July 1, consumer fuel prices will be increased periodically over and above the international price increases to reach parity between domestic and international prices by end-December 2008," The News quoted a summary approved by the federal cabinet as saying.
"Presently CNG and LPG are being used as transport fuels and have huge differential versus alternative fuels, which are subject to Petroleum Development Levy (PDL). It is being proposed to amend the law to enable the government to impose PDL whenever so determined by the government," the summary adds.
On power tariff, the summary said the government had been permitting automatic monthly determination based on fuel adjustment surcharge. This surcharge would now be determined in accordance with fluctuations in international oil prices.
"The first test of political commitment made by the government will be July 1, 2008 as the donors and international investors are watching Pakistan very closely," The News quoted a government official as saying.
The World Bank and other agencies are known to be pressurising Pakistan to do away with subsidies on petroleum products.
The summary says that amendments would be made to permit the imposition of additional fuel surcharge or other levies on electricity consumption to eliminate the power sector subsidy by end of fiscal 2008-09.
"This surcharge/levy would be notified by the government and collected by Discos (distribution companies)," the summary says.
The summary also shows that based on the average international price of petroleum products in May, the government is paying a per litre subsidy of Rs.44.11 on kerosene oil, Rs.37.07 on high speed diesel, Rs.33.65 on light diesel oil and Rs.7.15 on motor spirit.
"Expenditure per month owing to (subsidies) comes to about Rs.37.5 billion or Rs.1.25 billion per day," the summary says.