Pakistan weighs fuel price adjustment as jet fuel and kerosene costs surge
By Shahzad Paracha :
The Pakistani government is considering allowing domestic fuel prices to reflect global market trends after a sharp increase in jet fuel and kerosene costs, while exploring targeted subsidies for two- and three-wheelers to cushion the impact on lower-income users.
Officials say the prices of petrol and high-speed diesel have remained unchanged in recent weeks despite rising international oil prices. However, rates for jet fuel (JP-1) and kerosene have risen significantly.
According to official price data, the price of jet fuel increased by Rs84 per litre about 21.6% to Rs472 from Rs388 per litre on 21 March. Since the start of March, the price has jumped from Rs190 per litre, marking an increase of nearly 150%.
Kerosene prices have also climbed sharply. Within a week, the price rose by Rs71 per litre, or around 20%, to Rs429 from Rs358 per litre. Overall, kerosene has surged by about 127% since early March.
Officials say the increases reflect volatility in global energy markets following the conflict involving the United States, Israel and Iran.
Government absorbing rising costs
The government initially raised petrol and diesel prices by Rs55 per litre but later froze further increases, allocating roughly Rs69bn in subsidies to shield consumers from additional hikes during Ramadan.
Officials said the government is currently absorbing around Rs175 per litre in diesel costs and approximately Rs75 per litre for petrol. Funds for the subsidies have partly been diverted from development projects and emergency allocations.
However, officials warned that maintaining the price freeze may not be sustainable, particularly as reviews of two programmes with the International Monetary Fund (IMF) remain pending.
“You cannot postpone inflation artificially for long; delaying price adjustments only increases the burden later,” one official said.
Targeted subsidies under review
The issue was discussed during a meeting of a special cabinet committee tasked with monitoring petroleum prices and the country’s energy supply situation.
The committee reviewed a proposal to introduce targeted fuel subsidies for motorcycles and rickshaws instead of maintaining a broad price freeze on petroleum products.
Officials said the government was closely assessing the gap between international oil prices and domestic fuel rates to determine the timing of any policy adjustments.
Despite the price pressures, authorities said fuel supplies remain stable, with sufficient inventories available across the country. Imports for March and April have largely been secured and refineries are operating at normal production levels.
Rising jet fuel costs push up airfares
The sharp increase in jet fuel prices is already pushing up airline costs and is expected to translate into higher airfares.
Industry experts say fuel accounts for about 30–40% of an airline’s operating expenses. As a result, ticket prices on some routes have increased by 20–30%.
According to aviation officials, domestic fares have risen by between Rs10,000 and Rs15,000, while international tickets have increased by Rs30,000 to Rs40,000.
Travel disruptions linked to restricted airspace in parts of the Middle East have also contributed to higher prices, particularly on routes to Europe.
A travel agent said a Lahore-to-Denmark ticket that previously cost about Rs400,000 via Dubai had recently been sold for around Rs1m when routed through Turkey.
Flight disruptions and export concerns
Since the conflict in the Middle East escalated, about 325 flights operated by Pakistani airlines including roughly 200 by Pakistan International Airlines (PIA) have been cancelled.
PIA continues to operate flights to Fujairah and Al-Ain, while services to Kuwait, Qatar, Dubai and Bahrain remain suspended. Flights to Saudi Arabia are continuing as normal.
The airline said base fares had not been increased, but fuel surcharges ranging from $10 to $100 have been introduced.
Meanwhile, exporters have warned that higher aviation costs are also affecting cargo operations. The Pakistan Fruit and Vegetable Exporters Association said ground handling companies have imposed an additional charge of Rs50 per kilogram on air shipments.
The group warned that the additional costs could disrupt exports and lead to financial losses for businesses relying on air freight.
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