ISLAMABAD – For the fourth consecutive fortnight, petrol and high-speed diesel (HSD) prices are expected to decrease by approximately Rs10 per litre starting from September 15, thanks to a recent drop in international oil prices. However, the final reduction could be smaller if the government increases the petroleum levy to offset revenue shortfalls.
Informed sources report that international petrol and diesel prices have dropped by around $5 per barrel in the past two weeks, with petrol prices falling to below $76 per barrel and HSD to around $83 per barrel. If the exchange rate and tax calculations hold, this could result in a Rs10-11 per litre reduction for both fuels.
Despite this, the government may increase the petroleum levy by Rs5 per litre, which would halve the expected price cut to about Rs5-6 per litre. This potential levy hike is seen as a move to recover some of the Rs100 billion revenue shortfall faced by the Federal Board of Revenue (FBR) in the first two months of the fiscal year.
Previous Adjustments
In the latest pricing review on September 1, petrol and HSD prices were cut by Rs1.86 and Rs3.32 per litre, respectively. Over the last three fortnights, the cumulative reduction stands at Rs16.50 per litre for petrol and Rs19.88 per litre for HSD. However, the government had raised prices by Rs17.44 and Rs15.74 per litre in July, after reducing them between May 1 and June 15.
Impact on Consumers
Petrol is widely used in private vehicles, motorcycles, and rickshaws, making price changes especially relevant to middle and lower-income households. HSD, used in heavy transport, agriculture, and industry, has a more direct impact on inflation, affecting the cost of goods and transportation.
The price reductions, however, are rarely reflected in lower transport fares or the cost of essential goods, even though the transport sector remains heavily reliant on diesel.
Government’s Revenue Strategy
To meet its fiscal goals, the government has increased the maximum petroleum levy to Rs70 per litre, aiming to collect Rs1.28 trillion in the current fiscal year. Currently, consumers are paying around Rs78 per litre in various taxes, including a Rs60 per litre petroleum development levy (PDL) on both petrol and HSD.
With petrol and diesel contributing significantly to government revenues, with monthly sales averaging 700,000-800,000 tonnes, the pricing strategy remains crucial to balancing consumer relief with fiscal responsibility.
Story by Khaleeq Kiani
