Over Rs20 per litre cut in diesel price likely

Petrol rate may go down by Rs7.7 per litre for 1st half of March

ISLAMABAD:

The price of diesel has gone down in the international market, which may prompt Pakistan’s government to pass on partial relief to consumers.

The country’s oil industry is expecting a reduction of over Rs20 per litre in the price of diesel.

If the government increases the general sales tax (GST) on diesel, then it may keep the price unchanged for the first half of March by adjusting the petroleum development levy and the supply cost incurred by Pakistan State Oil (PSO), said sources.

It has already decided to increase the petroleum levy on diesel by Rs5 per litre from the beginning of March and by another Rs5 per litre from April 1 to bridge revenue shortfall in the ongoing financial year.

At present, the petroleum levy on high-speed diesel is Rs40 per litre, which will go up to Rs50 per litre, as agreed with the International Monetary Fund (IMF) under its loan programme, sources told The Express Tribune.

According to estimates of oil marketing companies, the price of high-speed diesel should fall by Rs21.69 to Rs258.31 per litre compared to the existing Rs280 per litre. The calculation is based on prices quoted by Platts, PSO’s exchange rate adjustment of Rs10 per litre and current rates of petroleum levy and GST.

Similarly, the ex-depot price of petrol may be scaled back by Rs7.70 to Rs264.30 per litre compared to the current price of Rs272 per litre.

Among other petroleum products, the price of kerosene oil is likely to go down by Rs22.98 per litre from Rs202.73 to Rs179.75 and light diesel oil (LDO) by Rs13 per litre from Rs196 to Rs183.

The government may opt to make less-than-required reduction in high-speed diesel price by increasing the petroleum levy by Rs10 per litre to bridge revenue gap.

While the petroleum levy target has been set at Rs855 billion, its collection is projected to reach only Rs680 billion by the end of current fiscal year in June. In order to plug the gap of Rs175 billion, the government has decided to jack up the petroleum levy on diesel by Rs5 per litre each in March and April.

On petrol and high-octane blending component (HOBC), a petroleum levy of Rs50 per litre is being charged. Diesel, which is widely used in agriculture and transport sectors, has average monthly consumption of over 500,000 tonnes. For 28 days of February, its consumption is estimated at 565,000 tonnes.

The price reduction will have a positive effect on farmers in the crop sowing season during which diesel consumption increases.

Since Ishaq Dar became finance minister, the government has been trying to keep an artificial control over petroleum prices, but it has not gone down well with the oil industry.

Published in The Express Tribune, February 28^th, 2023.

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