The Government announced a reduction in the prices of Petrol and high-speed diesel (HSD)

 

On Friday, the government announced a reduction in the prices of petrol and high-speed diesel (HSD) for the upcoming fortnight, with cuts of Rs10.2 and Rs2.33 per litre, respectively. The finance ministry issued a notification stating that the prices of petroleum products had exhibited a mixed trend in the international market over the last two weeks. The ministry explained that the Oil and Gas Regulatory Authority (Ogra) calculated the consumer prices based on these international market fluctuations.

The notification revealed the new petrol price to be Rs258.16 per litre and the new HSD price to be Rs267.89 per litre. The Prime Minister’s Office described the reduction as a gift from the premier in anticipation of the Eidul Azha holiday.

 Previously, sources had indicated that the government was expected to transfer the benefits of lower international prices to consumers. In the past two weeks, the international market prices for petrol and HSD had decreased by approximately $3.75 and $2.7 per barrel, respectively. This was in addition to a previous decline of about $12 and $8 per barrel for petrol and HSD, respectively, over the prior two fortnights.

 

The price of petrol had decreased from about $94 to slightly over $90 per barrel, while the price of HSD had been reduced from $98 to $95 per barrel. Additionally, the import premium on petrol had marginally decreased in the last fortnight from $9.7 to $9.5 per barrel. Meanwhile, the value of the rupee remained stable.

 

The final price of petrol and HSD also includes the Petroleum Development Levy (PDL), for which the government has reached the maximum permissible limit of Rs60 per litre under the law. This levy has contributed Rs720 billion to the government’s revenue in the first nine months of the fiscal year ending March 31. The government had originally set a budget target to collect Rs869 billion in PDL for the current fiscal year as part of commitments made to the International Monetary Fund (IMF), a target which has now been revised to Rs960 billion.

 

Currently, the government imposes approximately Rs80 per litre in taxes on both petrol and HSD, which includes around Rs19-20 per litre in customs duty. This tax imposition is in effect despite the fact that the general sales tax on all petroleum products is currently zero.

 Petrol and HSD are significant revenue generators, with monthly sales ranging from 700,000 to 800,000 tonnes compared to the mere 10,000 tonnes of monthly demand for kerosene. Petroleum and electricity prices have been key drivers of the high inflation rate. Petrol, which is predominantly used in private transport, small vehicles, rickshaws, and two-wheelers, directly impacts the budget of the middle- and lower-middle class.