Rupee Strengthens
ISLAMABAD: The expected drop in petroleum prices for the third consecutive fortnight is primarily due to exchange rate gains, with a reduction of Rs5-18 per liter for diesel and petrol, respectively, later this week.
Official sources have stated that the price of High-Speed Diesel (HSD) is likely to decrease by about Rs5-6 per liter, falling to less than Rs300 per liter unless the caretaker government further increases the petroleum levy. On the other hand, petrol is expected to become cheaper by about Rs18 per liter.
This reduction can be attributed to the rupee gaining about Rs3 against the dollar over the last fortnight, with the average price of diesel dropping by about $1.3 per barrel and that of petrol increasing by about $3.5 per barrel.
The sources have indicated that this price drop provides the government with an opportunity to raise the petroleum levy (PL) on HSD to the maximum permissible limit of Rs60 per liter from the current Rs55.
The total PL collection had already crossed Rs222 billion in the first quarter ending Sept 30, 2023, even though its per-liter rates had increased slowly over the period on petrol and kept almost unchanged at Rs50 per liter throughout the first quarter of the fiscal year.
Petroleum and electricity prices have been the key drivers of the rising inflation rate, recorded at 31.4% in Sept as measured by the Consumer Price Index, and are expected to be reinforced by a massive hike in gas rates approved by the government last week.
Informed sources have told that, based on existing tax rates and other overheads, the petrol price could decrease by Rs17-18 per liter as the rupee value had improved from Rs282 to Rs279 against the dollar during the fortnight. The HSD price could decrease by about Rs5-6 per liter if the government decides to maintain the PL at Rs55 per liter.
However, given the price drop, the Ministry of Finance may tend to increase the PL by Rs5 per liter. In that case, the HSD price could be kept unchanged. The HSD price in the international market has dropped by about a dollar per barrel to $113 from $114 in the last two weeks.
This will be the third time in a row that the caretaker government would be reducing petroleum prices after three consecutive increases. The government currently charges about Rs80 per liter in tax on petrol and Rs77 per liter on HSD. The government imposes a Rs60 per liter petroleum development levy (PDL) on petrol and Rs55 per liter on HSD.
Additionally, it charges Rs50 per liter for high octane blending component and 95RON petrol. The government also imposes custom duties of about Rs19-21 per liter on petrol and HSD. Petrol and HSD are the major revenue generators, with monthly sales of about 700,000-800,000 tonnes compared to just 10,000 tonnes of monthly demand for kerosene.
