Prime Minister Shehbaz Sharif has announced a reduction in fuel prices, providing what he described as “a big relief” to the people of Pakistan. The decision, which came into effect on Saturday, involves cuts in the prices of petrol and high-speed diesel (HSD) for the next fortnight. The new prices reflect reductions of Rs1.86 per litre for petrol and Rs3.23 per litre for HSD.
New Fuel Prices
According to the statement released by Pakistan’s state broadcaster, PTV, the new prices are set as follows:
- Petrol: Reduced to Rs259.1 per litre from the previous price.
- High-Speed Diesel (HSD): Now priced at Rs262.75 per litre.
- Kerosene Oil: The price is cut by Rs2.15, making the new rate Rs169.62 per litre.
- Light Diesel Oil (LDO): Reduced by Rs2.97 to Rs154.05 per litre.
These adjustments are part of a broader strategy by the government to mitigate the financial burden on the public amid fluctuating international oil prices and local economic conditions.
| Fuel Type | Previous Price (Rs/litre) | New Price (Rs/litre) | Price Reduction (Rs) |
|---|---|---|---|
| Petrol | Rs260.96 | Rs259.10 | Rs1.86 |
| High-Speed Diesel | Rs265.98 | Rs262.75 | Rs3.23 |
| Kerosene Oil | Rs171.77 | Rs169.62 | Rs2.15 |
| Light Diesel Oil | Rs157.02 | Rs154.05 | Rs2.97 |
Factors Influencing Price Cuts
The decision to lower fuel prices was primarily influenced by a decrease in international oil prices. Industry insiders revealed that the prices of petrol and HSD in the global market fell by approximately $2 to $2.30 per barrel over the last two weeks. Specifically, the average price of petrol dropped to about $80.40 per barrel from around $82.5 per barrel, while HSD saw a reduction from about $90.3 per barrel to $88 per barrel.
Additionally, there was a slight appreciation of the Pakistani rupee against the US dollar, gaining about 25 cents. This currency fluctuation contributed to the ability of the government to pass on some relief to consumers.
Changes in Import Premiums and Local Market Conditions
During the current pricing period, the import premium on petrol decreased by around 50 cents per barrel, settling at $8.50 per barrel. However, the import premium for HSD remained stable at $5 per barrel. These variations in import premiums, alongside currency appreciation, have allowed the government to reduce prices marginally while still maintaining budgetary targets.
| Product | Previous International Price (per barrel) | Current International Price (per barrel) | Change |
|---|---|---|---|
| Petrol | $82.5 | $80.4 | -$2.10 |
| High-Speed Diesel | $90.3 | $88.0 | -$2.30 |
Taxation and Levies on Petroleum Products
Despite the relief in prices, the government continues to levy significant taxes on petroleum products. Currently, around Rs78 per litre in taxes are imposed on both petrol and HSD. These include a petroleum development levy of Rs60 per litre, which is part of the government’s strategy to meet revenue collection goals for the fiscal year.
The finance bill has raised the maximum limit of the petroleum levy to Rs70 per litre, aiming to collect Rs1.28 trillion in the current fiscal year, which is significantly higher than the Rs1.019 trillion collected in the last fiscal year. This increase is nearly Rs150 billion more than the Rs869 billion budget target set previously.
Breakdown of Taxes and Margins on Petroleum Products
- Petroleum Development Levy: Rs60 per litre on petrol and HSD.
- Custom Duty: Approximately Rs18 per litre, applicable to both local production and imports.
- Distribution and Sales Margins: About Rs17 per litre, distributed between oil companies and their dealers.
| Component | Amount (Rs per litre) |
|---|---|
| Petroleum Development Levy | Rs60 |
| Custom Duty | Rs18 |
| Distribution and Sales Margins | Rs17 |
| Total Tax and Margins | Rs95 |
Government’s Strategy and Economic Impact
Prime Minister Shehbaz Sharif’s decision to lower fuel prices is seen as part of the government’s broader economic strategy to provide some relief to the masses amid rising inflation and economic challenges. The reduction in fuel costs is expected to have a positive impact on the cost of transportation and goods, potentially lowering the overall inflation rate.
However, the government must balance this relief with the need to meet its fiscal targets, which include substantial revenue collection from petroleum levies. The decision to maintain high tax rates on petroleum products, even as global prices fluctuate, underscores the government’s reliance on this revenue stream to fund budgetary commitments and development projects.
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