Zafar Iqbal
The federal government’s recent increase in petrol and high-speed diesel (HSD) prices has sparked widespread concern and debate. According to a notification from the Finance Division, the petrol price has been raised by Rs9.99 per litre to reach Rs275.6/ltr, while the price of HSD has been increased by Rs6.18/ltr, bringing it to Rs283.63/ltr. This decision has been attributed to fluctuations in international market prices for oil.
Despite the price hike, there will be no adjustments in the applicable duties and taxes, with the government maintaining that these will remain at their current levels. The increase in global oil prices has been cited as the primary reason for the anticipated rise in the prices of both petrol and HSD by more than Rs7.60 and Rs3.50, respectively. Sources have revealed that over the last fortnight, petrol and HSD prices in the international market surged by approximately $4.4 and $2 per barrel, contributing to the domestic price adjustments.
Adding to the concerns, the maximum limit of petroleum development levy (PDL) has been elevated to Rs70 per litre in the Finance Bill, aiming to generate Rs1.28 trillion in the current fiscal year. This marks a substantial increase compared to the previous year’s collection of Rs960 billion, exceeding the Rs869 billion budget target by nearly Rs91 billion. The increase in the PDL will lead to a higher cost of production for industries and businesses, potentially leading to an increase in the prices of goods and services.
Import premiums for both petrol and HSD have remained steady at $9.60 and $6.50 per barrel, respectively, during the current fortnight. Concurrently, the rupee has depreciated by about 17 paise against the dollar during the same period, further impacting the pricing dynamics. This depreciation makes imports more expensive, which in turn affects the prices of petrol and HSD in the domestic market.
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It’s noteworthy that the government imposes approximately Rs77 per litre tax on both petrol and HSD, with an additional Rs60 per litre PDL on these products, despite the general sales tax being zero for all petroleum products. Furthermore, a customs duty of about Rs17 per litre is imposed on petrol and HSD, regardless of whether they are locally produced or imported. These levies have substantial implications for the general public, especially considering the inflationary pressures arising from the prices of petroleum products.
The rise in petroleum and electricity prices has been identified as a significant driver of high inflation. Petrol is widely utilized in private transport, small vehicles, rickshaws, and two-wheelers. Conversely, the increase in diesel prices is particularly concerning as it predominantly impacts heavy transport vehicles and contributes to rising prices of essential commodities such as vegetables and other food items.
This development has undoubtedly raised apprehensions about its potential effects on the cost of living for the general populace. The interplay between international market dynamics, domestic taxes, and levies, as well as currency exchange rates, underscores the intricacies of the situation. It remains a critical issue that warrants close attention and informed discussions about its broader economic and social ramifications. Possible solutions or policy changes, such as revisiting the tax structure or exploring alternative energy sources, could help mitigate the impact of the price hike.
The recent hike in petrol prices in Pakistan is likely to have significant implications for the common person. Given that petrol is widely used for private transport, including small vehicles, rickshaws, and two-wheelers, the increase in prices will directly impact transportation costs for individuals and households. This, in turn, could lead to higher expenses for daily commuting and transportation needs, potentially impacting the discretionary income of individuals.
Moreover, the increase in diesel prices, which affects heavy transport vehicles, is particularly concerning as it could contribute to the rising prices of essential commodities such as vegetables and other food items. This could potentially lead to an overall increase in the cost of living for the general populace, as transportation costs are likely to be passed on to consumers through higher prices for goods and services.
Furthermore, the hike in petrol prices could have indirect effects on various sectors of the economy, including inflationary pressures that may impact household budgets and purchasing power. Additionally, businesses, especially those reliant on transportation for their operations, may face higher production and operational costs, potentially leading to price adjustments for their products and services.
In light of these potential effects, it’s important for policymakers and stakeholders to consider the broader impact of the petrol price hike on the common persons in Pakistan and explore possible solutions or policy changes to mitigate the socioeconomic implications. This could involve revisiting the tax structure, exploring alternative energy sources, or implementing measures to alleviate the burden on the general public.
