Petrol and diesel prices in Pakistan are anticipated to witness a third consecutive decrease, with diesel potentially becoming cheaper by around Rs5-6 per litre, and petrol by about Rs18 per litre in the coming week. The primary reason for this expected drop is the strengthening of the Pakistani rupee against the US dollar, resulting in favorable exchange rates.
This projected decrease can bring the price of High-Speed Diesel (HSD) to less than Rs300 per litre, provided there are no additional adjustments in the petroleum levy by the interim government. Meanwhile, petrol prices are expected to decrease significantly.
The recent gains in the Pakistani rupee, about Rs3 against the US dollar in the past two weeks, have played a pivotal role in this price shift. In addition to the currency’s performance, diesel’s average cost has decreased by approximately $1.3 per barrel, while petrol’s price has risen by about $3.5 per barrel.
The government may consider increasing the petroleum levy (PL) on HSD from the current Rs55 per litre to its maximum permissible limit of Rs60 per litre, given the opportunity created by falling prices. The revenue collections have generally exceeded targets thus far.
It’s important to note that the PL on petrol is already at its peak of Rs60 per litre. In the fiscal year, the government aims to collect approximately Rs869 billion in PL from petroleum products, in line with commitments to the International Monetary Fund (IMF).
The total PL collection surpassed Rs222 billion in the first quarter, even though per-litre rates increased gradually on petrol during that period. The petrol price may decrease by Rs17-18 per litre, considering existing tax rates and other costs. This would result in petrol rates falling to less than Rs270 per litre.
HSD prices could drop by about Rs5-6 per litre if the PL remains at Rs55 per litre, but if the Ministry of Finance opts to increase the PL by Rs5 per litre, the HSD price may remain unchanged. Unlike petrol, HSD prices on the international market have decreased by about a dollar per barrel in the last two weeks.
This impending price adjustment will mark the third consecutive reduction by the interim government, following three successive price hikes between August 15 and September 15. The government currently imposes taxes of approximately Rs80 per litre on petrol and Rs77 per litre on HSD.
While the general sales tax (GST) is zero on petroleum products, the government enforces a Rs60 per litre petroleum development levy (PDL) on petrol and Rs55 per litre on HSD. Additionally, there are custom duties of about Rs19-21 per litre on petrol and HSD. Petrol and HSD contribute significantly to government revenue due to their substantial monthly sales volumes.
