ISLAMABAD: The prices of petrol and high-speed diesel (HSD) are expected to drop below Rs300 per liter in the upcoming review, thanks to a significant decrease in global oil prices and the appreciation of the rupee.
The expected reduction, up to Rs20 per liter for HSD and Rs38 per liter for petrol, would mark the most significant single drop in fuel prices. However, it’s worth noting that the caretaker government may choose a different course of action, especially for HSD, which currently carries a petroleum development levy of Rs50 per liter, compared to Rs60 for petrol.
The government’s goal is to generate around Rs869 billion in levies on petroleum products in line with the current fiscal year’s budget target and commitments made to the International Monetary Fund (IMF).
If implemented, this would be the second consecutive time that the caretaker government has lowered petroleum prices following three consecutive fortnightly increases. Between August 15 and September 15, petrol and HSD prices had soared by Rs58.43 and Rs55.83 per liter, respectively, reaching historic highs of Rs331-333 per liter at retail.
At present, the government imposes about Rs82 per liter in taxes on petrol and Rs73 on HSD. While the general sales tax on all petroleum products is currently at zero, the government charges Rs60 per liter as a petroleum development levy on petrol and Rs50 each on HSD, high-octane blending component, and 95 research octane number (RON) petrol.
Since September 1, petrol and diesel prices have remained above Rs300 per liter. Along with expensive electricity, fuel has been a significant contributor to high consumer prices, pushing inflation to 31.4 percent in September. The impending reduction could potentially halt this rising trend in inflation.
Global Fuel prices
Sources suggest that, based on current tax rates and other factors, the price of petrol could decrease by Rs36-38 per liter due to a substantial 12 percent reduction in its international price from $99 per barrel to $87 and a 4 percent appreciation of the rupee against the US dollar.
This indicates that the petrol price in the Middle East decreased by $11.4 per barrel, while the rupee strengthened by more than Rs12 per dollar, from approximately Rs292 at the end of September to Rs280 at present.
