Arshad Mahmood Awan
There are moments in the life of a nation when the temptation to delay a difficult decision becomes more dangerous than the decision itself. Pakistan is living through one such moment. With international oil prices surging — driven in large part by the deepening conflict in the Middle East and the consequent threat to supply routes — the authorities in Islamabad find themselves caught between two painful options: raise fuel prices and absorb public anger, or ration consumption and invite accusations of mismanagement. The truth, as it almost always is in such situations, is that neither option alone will suffice. Both must be pursued, simultaneously and without further delay.
The arithmetic of the current crisis is stark. In the first week of the price differential claim, the government’s exposure stood at Rs23 billion. By the following week it had doubled to Rs48 billion. By the third week, credible estimates suggest the cumulative toll had crossed Rs100 billion. These are not abstract figures. They represent real pressure on oil marketing companies, real strain on supply chains, and a real threat to the fuel security of a country of 230 million people. If the government continues absorbing these costs through open-ended subsidies while settlement payments to oil marketing companies pile up, it risks destabilising the very supply network it is trying to protect — even where adequate import orders and existing stocks might otherwise provide a cushion. The mathematics of delay is unforgiving. Every week of inaction compounds the eventual cost.
The case for deregulating petroleum prices is, at this point, overwhelming. The government has already taken this step with HOBC and kerosene oil. It must now apply the same logic to the broader petroleum basket. If targeted relief is considered necessary for the most vulnerable segments of the population, then that relief must be delivered directly — through transparent, means-tested mechanisms — not buried in blanket subsidies that benefit rich and poor alike without distinction. A subsidy that is invisible is a subsidy that cannot be audited, reformed, or redirected.
The argument that raising HOBC prices will compensate for the broader subsidy burden does not hold up to scrutiny. HOBC accounted for barely five percent of total petrol consumption last year. Higher HOBC prices may even backfire, pushing affluent HOBC users toward subsidised petrol and swelling the subsidy bill further. It may generate a striking headline without generating any meaningful fiscal relief. The government must be honest with itself and with the public: the demand for petrol and diesel is not being restrained by pricing, and the current trajectory of subsidy growth cannot be sustained.
Pakistan has been here before. The fuel and fiscal crisis of 2022 should not have faded from institutional memory so quickly. The lessons of that period were costly. The country lurched toward an economic precipice precisely because the government of the day chose to absorb a global price shock through subsidies it could not afford, in the belief that the situation would resolve itself before the bill came due. It did not. The fiscal space was shattered, the IMF was called in under emergency conditions, and ordinary citizens paid the price through a cascade of inflation, currency depreciation, and economic contraction. The same mistake must not be allowed to repeat itself. Pakistan’s macroeconomic position remains fragile, its foreign exchange reserves insufficient to absorb an import bill that could rise by as much as 65 percent if consumption is left unchecked at current international oil prices.
This is why consumption rationing is not merely a supplementary option — it is a national necessity. Pakistan has, to its credit, managed to secure oil supplies through the Strait of Hormuz and alternative routes. That is no small achievement given the current instability in the region. But securing supply is only one dimension of the challenge. The country does not possess the economic buffers to pay for unrestricted consumption at sharply elevated prices. Passing on the price impact to consumers and simultaneously introducing a structured rationing framework is therefore not a matter of political preference. It is a question of national economic survival.
The government is reportedly considering CNIC-based fuel quotas for two, three, and four-wheelers. The intent is sound; the instrument is debatable. CNICs identify individuals, not vehicles, and a significant portion of Pakistan’s vehicle fleet is registered to corporate entities, businesses, and other juridical persons who cannot meaningfully be addressed through personal identification numbers. A registration-based allocation system — anchored to vehicle registration records rather than individual CNICs — would be considerably more practical, less susceptible to abuse, and far simpler to administer at the point of sale. No rationing system is entirely leakproof, but the goal must be to select the system least prone to manipulation, not the system that sounds most technically sophisticated.
There are international precedents worth examining, though not blindly importing. Slovenia, notably, has become the first European Union member state to implement formal fuel rationing in response to the current global crisis. Private motorists there face a daily ceiling on fuel consumption, while businesses and farmers operate under more generous allowances that reflect their greater dependence on fuel. Pakistan need not replicate this model in its European form, but the underlying logic is transferable: consumption must be managed, not left entirely to market forces when the market itself is being distorted by geopolitical crisis.
The road ahead for Pakistan’s energy authorities is neither comfortable nor easy. It requires passing on costs that consumers did not cause, in an economy already stretched by inflation and sluggish growth. It requires candour from a government that would naturally prefer to delay a politically difficult announcement. But the alternative — continuing on the current path until the fiscal damage becomes irreversible — is far worse. The subsidies must end. Prices must be adjusted. Consumption must be rationed. And the lesson of 2022 must, this time, be genuinely learned. Pakistan cannot afford to pay for the same mistake twice.
