ISLAMABAD: For the fourth consecutive fortnight, the prices of major petroleum products, including petrol and high-speed diesel (HSD), are expected to decrease by around Rs10 per litre from September 15, barring any increase in the petroleum levy by the government.
Sources indicate that international market prices for petrol and HSD have fallen by approximately $5 per barrel in the past two weeks. If the final exchange rate calculations and existing tax rates hold steady, the price reductions for both products could be in the range of Rs10-11 per litre.
However, the government might raise the petroleum levy by Rs5 per litre to take advantage of the lower prices and help mitigate the Rs100 billion revenue shortfall faced by the Federal Board of Revenue (FBR) in the first two months of the current fiscal year. If this occurs, the price cut could be reduced to around Rs5-6 per litre.
Petroleum Levy Increase Could Halve Expected Price Reductions
Officials reported that the average international price of petrol has decreased to below $76 per barrel from about $81 per barrel, while HSD prices have fallen to approximately $83 per barrel from $88.5. During the current fortnight, the import premium for petrol and HSD remained relatively stable at $8.5 and $5 per barrel, respectively, with the exchange rate showing minimal fluctuation.
The current ex-depot prices are Rs259.1 per litre for petrol and Rs262.75 per litre for HSD. The last adjustment on September 1 saw a reduction of Rs1.86 for petrol and Rs3.32 for HSD. Over the past three fortnights, the cumulative reductions have been Rs16.50 per litre for petrol and Rs19.88 per litre for HSD.
Earlier this year, the prices of petrol and HSD were increased by Rs17.44 and Rs15.74 per litre, respectively, in the first fortnight of July. Between May 1 and June 15, prices for both products were reduced by about Rs35 and Rs22 per litre, respectively.
Petrol primarily affects the budget of the middle and lower middle classes as it fuels private transport, small vehicles, and two-wheelers. Conversely, HSD, used mainly in heavy transport vehicles, trains, and agricultural machinery, impacts the cost of essential goods such as vegetables. Despite price drops, reductions are rarely reflected in transport fares or the prices of essential commodities.
The government has set the maximum petroleum levy limit to Rs70 per litre in the finance bill, aiming to collect Rs1.28 trillion in the next fiscal year, a significant increase from the Rs1.019 trillion collected last year. The current tax rates include approximately Rs78 per litre in total taxes on petrol and HSD, including Rs60 per litre in petroleum development levy (PDL), Rs18 per litre in customs duty, and Rs17 per litre in distribution and sale margins.
Additionally, the government imposes Rs50 per litre on light diesel and high-octane blending components, with petrol used in luxury imported vehicles also attracting higher levies. Petroleum products are major revenue sources with monthly sales of around 700,000-800,000 tonnes, compared to a much smaller demand for kerosene.
