Islamabad – May 29, 2024 – In light of a bearish trend in the international market, petrol and high-speed diesel (HSD) prices in Pakistan are expected to decrease by approximately Rs6.50 to Rs7.50 per litre on May 31. This comes despite a slight exchange rate loss.
Informed sources reported that international prices of petrol and HSD have dropped by about $3.25 and $2.10 per barrel, respectively, over the last fortnight. This follows previous reductions of $8.7 and $4.3 per barrel, respectively, in the preceding fortnight.
Based on the final calculation of the Inland Freight Equalisation Margin (IFEM), petrol prices are projected to decrease by Rs7.25 per litre, while HSD prices are expected to drop by Rs6.25 per litre. The import premium on petrol has decreased by approximately 7% in the last fortnight, from $10.30 to $9.70 per barrel.
Despite the rupee depreciating by about 10 paise against the US dollar during the fortnight, the net impact is estimated to reduce petrol prices by Rs7 per litre from the current ex-depot rate of Rs273.10. Similarly, the HSD rate is expected to drop by Rs6.25 per litre, subject to final exchange rate adjustments and IFEM considerations, from the current rate of Rs274.08 per litre.
Officials noted that the price of petrol in the international market had fallen to about $95 per barrel from around $98.27 per barrel, while HSD had reduced to $97 per barrel from $99.12 per barrel. Additionally, prices of petrol and HSD had already dropped by Rs15.93 and Rs7.88 per litre, respectively, effective from May 16.
The government has reached the maximum permissible petroleum levy of Rs60 per litre on both petrol and HSD, collecting Rs720 billion in the first nine months ending March 31. The fiscal year target, set in line with commitments made to the International Monetary Fund (IMF), aims to collect Rs869 billion as a petroleum development levy (PDL) on petroleum products.
Higher petroleum and electricity prices have been driving inflation. Petrol is primarily used in private transport, small vehicles, rickshaws, and two-wheelers, impacting the budget of the middle and lower-middle classes. HSD prices are particularly inflationary, affecting heavy transport vehicles, trains, agricultural engines, trucks, buses, tractors, tube wells, and threshers, thus raising the prices of vegetables and other essentials.
Currently, the government imposes approximately Rs82 per litre in taxes on petrol and HSD. Although the general sales tax (GST) is zero on all petroleum products, the government charges Rs60 per litre PDL on both products. Additionally, Rs50 per litre is charged for high-octane blending components and 95RON petrol, along with about Rs19-20 per litre customs duty on petrol and HSD.
Petrol and HSD are major revenue generators, with monthly sales of about 700,000-800,000 tonnes compared to a modest 10,000 tonnes of kerosene demand.
Story by Khaleeq Kiani
