Fuel prices may drop amid global market decline
ISLAMABAD: The prices of petrol and high-speed diesel (HSD) are expected to decline by Rs8 to Rs10 per litre each on Nov 15 for the next fortnight, mainly due to lower prices in the international market.
Informed officials said that the international prices of both HSD and petrol had fallen over the past two weeks. However, the rupee depreciated against the dollar during the same period, reducing the benefit of lower international prices for consumers.
For price calculations, officials said that HSD had become about $9 per barrel cheaper on average, down from about $113 to $104, during the week, while the price of petrol had dropped by a dollar from $91 to $90. The rupee, on the other hand, lost Rs6 in value against the dollar, declining from Rs280 to Rs286.
The government has already reached the maximum permissible limit of Rs60 per litre in petroleum development levy (PDL), as stipulated by the law. The government’s budget target is to collect Rs869 billion as PDL on petroleum products for the current fiscal year, in accordance with commitments to the International Monetary Fund (IMF). Despite a gradual increase in per litre rates on petrol and almost unchanged rates at Rs50 per litre for petrol in the first quarter of the fiscal year, the total PDL collection had exceeded Rs222bn in the first quarter ending Sept 30, 2023.
Petroleum and electricity prices have been the key drivers of high rate of inflation recorded at 27pc in October as measured by consumer price index and are expected to be reinforced by a massive hike in gas rates with effect from Nov 1.
Diesel, petrol prices expected to decrease by Rs10 per litre
Petrol, commonly used in private transport, small vehicles, rickshaws, and two-wheelers, directly impacts the budgets of the middle- and lower-middle class. Conversely, HSD price is considered highly inflationary, given its predominant use in heavy transport vehicles, trains, and agricultural engines such as trucks, buses, tractors, tube wells, and threshers. It notably contributes to the prices of vegetables and other eatables.
On Oct 31, the government had kept the petrol and HSD prices unchanged. Earlier, between Aug 15 and Sept 15, petrol and high-speed diesel prices had surged by Rs58.43 and Rs55.83 per litre, respectively, reaching a historic Rs331 to Rs333 per litre at the retail stage until Sept 30. Subsequently, rates for petrol and diesel were reduced by Rs52 and Rs26 per litre, respectively, in two cuts with effect from Oct 1 and 16.
Presently, the government is charging about Rs80 per litre tax on both petrol and HSD. Despite a zero general sales tax (GST) on all petroleum products, the government levies Rs60 per litre as PDL on both products.
Additionally, a Rs50 per litre charge is applied to high-octane blending component and 95RON petrol. Customs duty on petrol and HSD amounts to about Rs19-Rs21 per litre. Petrol and HSD serve as significant sources of revenue, generating monthly sales of approximately 700,000-800,000 tonnes per month, in stark contrast to the mere 10,000 tonnes of monthly demand for kerosene.
Published in Dawn, November 13th, 2023