ISLAMABAD, Nov 14: The Ministry of Petroleum is reported to have suggested a 10 to 12 per cent reduction in petrol and diesel prices for the second fortnight of the current month in the wake of a considerable decline in crude prices in the international market.

If the proposal is accepted by Prime Minister Yousuf Raza Gilani, then it is expected that the Oil and Gas Regulatory (OGRA) will announce on Saturday night a minimum reduction of around Rs7 per litre in the price of petrol and about Rs4 in that of diesel.

Sources told Dawn that in the first fortnight of the current month, the government had earned around Rs12 billion from the Petroleum Development Levy (PDL).

Currently, the government is not paying any subsidy on petroleum products.

The price of crude oil in the international market declined to about $55 a barrel on Friday following Wednesday’s cut in demand growth by the US Energy Information Administration.

The EIA has said that oil demand in the US will drop by 5.4 per cent this year and by another 1.3 per cent in 2009, while the International Energy Agency said it could cut its demand growth forecast again.

The sources said that the jet fuel (consumed by the airline industry and military) price which already witnessed a considerable decline over the past month might be furthered reduced.

Currently, the government is not taxing the JP-1, which is consumed by domestic and foreign airlines. It is charging a minimal PDL (Rs3 a litre) on two other types of jet fuel (JP-4 and JP-8).

On the contrary, the government is taxing petrol sold directly to consumers by oil companies at Rs30.23 per litre, while Rs28.84 is charged on the retail sale.

The high octane blending component (HOBC) is being taxed high rate of Rs41.57 per litre at retail outlets and Rs43.11 sold directly by oil companies. It is also earning Rs8.17 on each litre of kerosene oil and Rs12.33 per litre on light diesel.