Major relief in diesel price expected

Fuel cost may go down by Rs14.31 per litre for first fortnight of April

ISLAMABAD:

A massive decline in the price of diesel in the global market may force the government to pass on a major relief to petroleum consumers for the first fortnight of April.

According to sources, the federal government may announce a substantial reduction of up to Rs14 per litre in ex-depot fuel prices based on the current petroleum levy and general sales tax, effective from April 1, 2023.

The price of high-speed diesel (HSD) is likely to go down by Rs14.31 per litre, a welcome relief for people in the current high inflationary environment.

Diesel is widely used in transport and agricultural sectors. Any reduction in its price will be particularly a good omen for farmers as the crop sowing season has kicked off.

If the government passes on full price relief to the consumers, diesel will cost Rs278.66 per litre compared to the existing price of Rs293 per litre.

Meanwhile, oil marketing companies are projecting a reduction of Rs3.51 per litre in the price of petrol.

Petrol is an alternative to the compressed natural gas (CNG), especially in Punjab where CNG outlets rely on imported gas. However, in the recent winter, LNG was not made available to them.

The government is currently working on a cross-subsidy programme worth Rs120 billion for petrol consumption. It is planning to charge owners of luxury cars a Rs50-per-litre higher price and provide price relief of an equivalent amount to the motorbikes and small cars.

Now, the government has an opportunity to slash the price of petrol to provide relief to the poor and lower middle-class consumers.

If the entire relief is passed on to the consumers, the price of petrol will drop to Rs268.49 per litre against the existing price of Rs272 per litre.

Similarly, the price of kerosene oil may fall by Rs13.46 per litre and light diesel oil (LDO) by Rs10.28 per litre.

Kerosene oil is an important household fuel because of its use for cooking and heating in remote areas. Its price may decrease from Rs190.29 per litre to Rs176.83 per litre. LDO price may decline to Rs174.40 per litre from Rs184.68 per litre.

The price calculation is based on the cost of supply borne by Pakistan State Oil (PSO). The government may allow exchange rate adjustment of Rs6 per litre on petrol and Rs15 per litre on HSD. In the past 13 days, the US dollar has appreciated by Rs4.66 against Pakistani rupee.

The government is required to increase petroleum levy on HSD by Rs5 to Rs50 per litre with effect from April 1 to meet a condition of the International Monetary Fund.

It has already been charging petroleum levy of Rs50 per litre on petrol since November 2022.

Published in The Express Tribune, March 30^th, 2023.

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