ISLAMABAD: Petrol and high-speed diesel (HSD) prices are projected to fall below Rs300 per litre in the coming review, thanks to a significant drop in global oil rates and the rupee’s appreciation.
The anticipated per-litre decrease of up to Rs20 in HSD and Rs38 in petrol would be the most substantial single drop in fuel prices.
However, the caretaker government can decide otherwise, particularly in the case of high-speed diesel, which presently carries the petroleum development levy of Rs50 per litre compared to Rs60 on petrol.
The government aims to charge about Rs869 billion in levy on petroleum products during the current fiscal year’s budget target and commitments made with the International Monetary Fund (IMF).
If it goes through, this will be the second time in a row that the caretaker government is reducing petroleum prices after three fortnightly increases.
Between Aug 15 and Sept 15, petrol and high-speed diesel prices had risen by Rs58.43 and Rs55.83 per litre, respectively, to historic highs of Rs331-333 per litre at the retail stage.
At present, the government is charging about Rs82 per litre tax on petrol and Rs73 on high-speed diesel.
Although the general sales tax on all petroleum products is currently zero, the government is charging Rs60 per litre petroleum development levy on petrol and Rs50 each on HSD, high-octane blending component, and 95 research octane number (RON) petrol.
Petrol and diesel prices have stayed above Rs300 per litre since Sept 1. Along with costly electricity, fuel has been the key driver of high consumer prices, pushing inflation to 31.4 per cent in September. Against this backdrop, the coming reduction could halt the rising inflationary trend.
Sources told Dawn that based on the existing tax rates and other overheads, the petrol price could come down by Rs36-38 per litre because of a massive 12pc reduction in its international price from $99 per barrel to $87 and over 4pc rupee appreciation against the US dollar.
This suggests the petrol price in the Middle East dropped by $11.4 per barrel while the rupee appreciated by more than Rs12 per dollar, from about Rs292 in the final days of September to Rs280 at present.
However, the petrol premium paid by Pakistan State Oil (PSO) to secure import cargoes had slightly increased from $15 to $16.7 per barrel during the outgoing fortnight.
Factoring in these changes, the ex-refinery petrol price is expected to fall by over Rs38 per litre and therefore the ex-depot price should be around Rs286 per litre for the next fortnight (Oct 16 to 31).
The calculation is based on actual costs in the first 12 days of the current month and estimates for the last three days. Petrol is mostly used in private transport, small vehicles, rickshaws and two-wheelers and directly affects the budgets of the middle- and lower-middle classes.
On the other hand, HSD’s price could decrease by about Rs19-20 per litre, provided the government decides to maintain the petroleum levy at Rs50 per litre.
However, given this opportunity, the Ministry of Finance could push for increasing the levy by Rs5 per litre to meet the budget target. In that case, the reduction could be around Rs14-15 per litre.
Like petrol, the price of high-speed diesel in the global market has also dropped by about $8 per barrel to $114 from $122 in the last two weeks.
Considering the rupee’s appreciation and the unchanged premium on import cargo, HSD’s cost and freight price is likely to fall by Rs22 per litre, reducing the ex-depot price to about Rs296-98.
Most of the transport sector runs on HSD. Its price is considered highly inflationary, as it is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube wells and threshers, and particularly adds to the prices of vegetables and other eatables.
The government is also charging about Rs21-23 per litre customs duty on petrol and HSD. The two key fuel products are major revenue spinners for the government, with their sales of about 700,000 to 800,000 tonnes per month compared to 10,000 tonnes of monthly demand for kerosene.
Published in Dawn, October 13th, 2023
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