Petroleum prices in Pakistan are expected to decrease for the third consecutive fortnight. Diesel is predicted to see a reduction of Rs5 per litre, while petrol is expected to decrease by Rs18 per litre. This decrease is primarily due to the recent gain of about Rs3 against the US dollar for the Pakistani rupee. Additionally, the average price of diesel has dropped by approximately $1.3 per barrel, while the average price of petrol has increased by about $3.5 per barrel.
With the drop in prices, the government has an opportunity to increase the petroleum levy (PL) on high-speed diesel (HSD) to the maximum permissible limit of Rs60 per litre, up from the current rate of Rs55 per litre. However, the government has already surpassed its revenue collection targets, so the decision to raise the PL will be evaluated. The PL on petrol is already at its peak of Rs60 per litre.
In the first quarter of the fiscal year ending on September 30, 2023, the total PL collection had already exceeded Rs222 billion, even though its per-litre rates had increased gradually for petrol and remained consistent at Rs50 per litre for the entire quarter. The increase in petroleum and electricity prices has been a significant factor contributing to the rise in inflation, which was reported at 31.4% in September according to the Consumer Price Index. Additionally, the recent approval of a substantial hike in gas rates by the government is expected to further reinforce inflation.
The calculations for the expected price reductions are based on actual costs in the first 12 days of the current fortnight and estimates for the remaining days. If the PL for HSD is maintained at Rs55 per litre, the price could decrease by approximately Rs5-6 per litre. However, it is possible that the Ministry of Finance may choose to increase the PL by Rs5 per litre, in which case the HSD price would remain unchanged. Unlike petrol, the international market price for HSD has dropped by about $1 per barrel, from $114 to $113, in the past two weeks.
If the PL rate is maintained, the estimated HSD price would be around Rs296-98 per litre. This marks the third consecutive reduction in petroleum prices by the caretaker government, following three consecutive increases. From August 15 to September 15, petrol and high-speed diesel prices had increased by Rs58.43 and Rs55.83 per litre, respectively, reaching a record high of Rs331-333 per litre at the retail stage until September 30. The rates for petrol and diesel were then reduced by Rs52 and Rs26 per litre, respectively, in two cuts as of October 1 and 16.
Currently, the government imposes a tax of about Rs80 per litre on petrol and Rs77 per litre on HSD. While the general sales tax (GST) is zero for all petroleum products, there is a petroleum development levy (PDL) of Rs60 per litre on petrol and Rs55 per litre on HSD. Additionally, there is a charge of Rs50 per litre for high octane blending component and 95RON petrol. The government also imposes customs duties of about Rs19-21 per litre on petrol and HSD. Petrol and HSD are major sources of revenue, with monthly sales of about 700,000-800,000 tonnes compared to a monthly demand of only 10,000 tonnes for kerosene.