In an effort to alleviate the burden on consumers, Prime Minister Shehbaz Sharif has instructed the finance ministry to implement a substantial reduction in petrol prices by Rs15.4 per litre for the upcoming two weeks. This decision, aimed at bolstering the economy and curbing inflation, reflects the government’s commitment to fostering people-friendly policies.
Additionally, a reduction of Rs7.9 per litre in diesel prices has been proposed, although the specific type of diesel affected was not explicitly mentioned. It is anticipated that the prices of petrol and high-speed diesel (HSD) will witness a decrease ranging from Rs6.5 to Rs7.5 per litre as of May 31, despite a marginal impact from the bearish trend in the international market’s exchange rate.
Insiders familiar with the matter have indicated that the international market experienced a decline of approximately $3.25 and $2.1 per barrel in petrol and HSD prices, respectively, over the last fortnight. This comes after a prior reduction of $8.7 and $4.3 per barrel in petrol and HSD rates, respectively. Notably, the import premium on petrol has diminished by around seven per cent to $9.7 per barrel within the same period. This information is crucial for the public to understand the factors influencing petrol and diesel prices.
However, the Pakistani rupee underwent a slight depreciation of approximately 10 paise against the US dollar during the aforementioned fortnight. Meanwhile, the price of HSD in the international market dipped by about $2.1 per barrel, with the import premium holding steady at $6.5 per barrel. Consequently, the HSD rate is projected to decrease by Rs6.25 per litre from its current depot stage value of Rs274.08 per litre.
Sources have reported that petrol prices have fallen to approximately $95 per barrel from the previous figure of around $98.27 per barrel in the international market. Similarly, the price of HSD has decreased to $97 from $99.12 per barrel. These price reductions translated to a decline of Rs15.93 per litre for petrol and Rs7.88 per litre for HSD, effective from May 16.
Crucially, the government has already reached the maximum permissible limit of Rs60 per litre in petroleum levy, amassing Rs720 billion in the initial nine months until March 31. The government’s target was to collect Rs869 billion as petroleum development levy (PDL) on petroleum products for the current fiscal year, as per commitments to the International Monetary Fund.
The increase in petroleum and electricity prices has been identified as a driving force behind inflation. Given that petrol is predominantly utilized in private transport and smaller vehicles, its cost directly impacts the budgets of middle and lower-middle-class individuals. Conversely, HSD prices, integral to heavy transport vehicles, trains, and agricultural machinery, notably contribute to the prices of essential commodities such as vegetables.
Presently, the government imposes a tax of approximately Rs82 per litre on petrol and HSD. Despite a zero general sales tax on all petroleum products, the government levies Rs60 per litre PDL on both products. Additionally, it applies an Rs50 per litre charge for high-octane blending components and 95RON petrol, along with approximately Rs19-20 per litre in customs duty on petrol and HSD.
Notably, petrol and HSD are pivotal revenue generators, with monthly sales ranging from 700,000 to 800,000 tonnes, far surpassing the demand for kerosene, which stands at a mere 10,000 tonnes.
