The government overshot budget allocation of Rs 15 billion for subsidies by a whopping Rs 160 billion ($2.4 billion) in the past year because it failed to pass on any increases when oil prices doubled during that period. The official said that because of the subsidies consumers were paying equivalent of $70 for a barrel of crude, almost half the prevailing international market price.
"Starting by July 1, 2008, consumer fuel prices will be increased periodically over and above the international price increases, to reach a parity between domestic and international prices by the end of December 2008," the official said.
Pakistan is currently paying following oil subsidies based on per litre average international prices for petroleum products in May: Rs 44.11 (66 US cents) on kerosene oil; Rs 37.07 on high speed diesel; Rs 33.65 on light diesel oil; Rs 7.15 on motor spirit; and Rs 4.37 on high octane blending component. The government is also aiming on slashing electricity subsidies given to the Water and Power Development Authority (Wapda) to Rs 3 billion in fiscal year 2008-09, from the current Rs 21.3 billion.