ISLAMABAD – A significant reduction in global oil prices and the strengthening of the rupee are expected to drive petrol and high-speed diesel (HSD) prices below Rs300 per liter in the upcoming review. This projected decrease of up to Rs20 per liter for HSD and Rs38 per liter for petrol would represent the most substantial single drop in fuel prices.
However, it is worth noting that the caretaker government retains the discretion to decide otherwise, especially concerning high-speed diesel. Currently, HSD carries a petroleum development levy of Rs50 per liter, whereas petrol has a levy of Rs60 per liter.
The government’s aim is to collect around Rs869 billion in levy on petroleum products to meet the budget target and commitments made with the International Monetary Fund (IMF) for the current fiscal year.
If these changes materialize, it will mark the second consecutive reduction in petroleum prices by the caretaker government after three consecutive fortnightly increases. Between August 15 and September 15, the prices of petrol and high-speed diesel had risen significantly, reaching historic highs of Rs331-333 per liter at the retail level.
At present, the government imposes approximately Rs82 per liter in tax on petrol and Rs73 on high-speed diesel. While the general sales tax on all petroleum products is currently set at zero, there is a petroleum development levy of Rs60 per liter on petrol and Rs50 per liter on HSD, among other fuels.
For the past month, petrol and diesel prices have remained above Rs300 per liter. Alongside costly electricity, fuel has been a major contributor to high consumer prices, which pushed inflation to 31.4 percent in September. The anticipated reduction in fuel prices could help stem the rising trend of inflation.
Sources have indicated that, based on the current tax rates and other factors, the price of petrol could decrease by Rs36-38 per liter. This is due to a substantial 12 percent reduction in its international price, from $99 per barrel to $87, and a more than 4 percent appreciation of the rupee against the US dollar.
Similarly, the price of high-speed diesel in the global market has decreased by about $8 per barrel in the last two weeks. With the rupee’s appreciation and stable import cargo premiums, the cost and freight price for HSD is likely to decrease by Rs22 per liter.
It is essential to note that both petrol and high-speed diesel prices are major revenue sources for the government, with significant monthly sales. Their prices have a direct impact on various sectors of the economy and household budgets, making these anticipated reductions significant for the middle- and lower-middle-class segments.
