Petrol prices set to drop by Rs2.97/litre from Sept 1

Expected relief to.come in response to global oil market fluctuations.

ISLAMABAD:

Consumers may see relief at the pump with a potential Rs2.97 per litre reduction in petrol prices starting September 1, 2024. This comes in response to global oil market fluctuations. Preliminary government estimates suggest price cuts for high-speed diesel (HSD) by Rs2.31 per litre, alongside reductions for kerosene oil and light diesel oil (LDO) by Rs1.19 and Rs1.96 per litre, respectively.

If implemented, petrol prices could drop from Rs260.96 to Rs257.99 per litre, while HSD prices could fall from Rs266.07 to Rs263.76 per litre. Kerosene oil might be reduced to Rs170.38 per litre, and LDO could decrease to Rs155.06 per litre. These estimates are based on the current tax structure, including the Petroleum Levy, which was increased in the 2024-25 fiscal year budget from Rs60 to Rs70 per litre. However, the levy has remained at Rs60 per litre thus far.

The government has kept sales tax on petroleum products at zero, directing revenue collection primarily through the Petroleum Levy, which benefits the federal government. This tax structure has left provinces out of the revenue pool typically generated by sales tax on petroleum products.

According to industry officials, the Inland Freight Equalisation Margin (IFEM), recently revised upwards, will also impact fuel pricing. IFEM on petrol has increased from Rs7.79 to Rs8.3 per litre, and for HSD, it has risen from Rs4.4 to Rs5 per litre.

HSD, primarily used in transport and agriculture, impacts inflation-sensitive consumers. Petrol demand, especially high in Punjab due to costly imported CNG, fuels motorbikes and cars. Kerosene oil, vital for cooking in remote northern areas, is also used by the Pakistan Army. LDO serves industries. Despite potential price cuts, oil industry officials caution that final adjustments could be absorbed through taxes, limiting the benefit to consumers.