After four consecutive fortnights of price reductions, the prices of major petroleum products — petrol and high-speed diesel (HSD) — are anticipated to rise by Rs7 and Rs8 per litre, respectively, starting from July 1 for the next two weeks. This increase is primarily attributed to higher international market rates.
Sources familiar with the matter indicated that over the past fortnight, petrol and HSD prices in the global market have risen by approximately $4.4 and $5.5 per barrel, respectively. Depending on final calculations and prevailing tax structures, petrol is expected to see a Rs7 increase per litre, while HSD could go up by Rs8.5 per litre.
The potential price hike could escalate further if the government opts to raise the petroleum development levy (PDL) from the current Rs60 per litre with the onset of the new fiscal year.
Under the Finance Bill 2024, the maximum limit of PDL has been raised to Rs80 per litre, aiming to collect Rs1.28 trillion compared to an estimated Rs960 billion in the outgoing fiscal year — an increase of approximately Rs91 billion from the budgeted target of Rs869 billion.
Finance Minister Muhammad Aurangzeb had announced on June 13 that the PDL would be adjusted gradually based on market pricing trends.
During the current period, the import premiums for both petrol and HSD have remained unchanged at $9.60 and $6.50 per barrel, respectively. Meanwhile, the rupee has depreciated by about 17 paise against the dollar over the fortnight.
Since May 1, the prices of both petrol and HSD have been declining due to a downturn in the global market. Petrol prices have decreased by around Rs35 per litre, from approximately Rs294 to about Rs259 as of April 30. Similarly, HSD prices have dropped by about Rs22 per litre, declining to Rs268 from over Rs290 in the second fortnight of April.
Currently, the government is collecting the maximum permissible PDL of Rs60 per litre on both petrol and HSD. The budget documents for 2024-25 indicate a revision of the petroleum levy collection target from Rs869 billion to Rs960 billion, as per commitments with the International Monetary Fund (IMF).
Presently, the government imposes approximately Rs77 per litre in taxes on petrol and HSD. Although general sales tax (GST) on all petroleum products is zero, the government levies Rs60 per litre as PDL on both products, which typically impacts the general public. Additionally, there is a customs duty of about Rs17 per litre on petrol and HSD, regardless of whether they are locally produced or imported.
Conversely, light diesel and high-octane blending components, primarily used in luxury imported vehicles, are subject to Rs50 per litre in taxes.
Petroleum and electricity prices are major drivers of inflation, particularly affecting the budgets of middle and lower-middle-class households. Petrol is predominantly used in private transport, small vehicles, rickshaws, and two-wheelers, directly influencing daily living expenses.
On the other hand, HSD prices contribute significantly to inflation as they are widely used in heavy transport vehicles, trains, and agricultural machinery such as trucks, buses, tractors, tube wells, and threshers, thereby impacting the prices of essential commodities like vegetables.
Petrol and HSD remain crucial sources of revenue, with monthly sales ranging between 700,000 to 800,000 tonnes, compared to just 10,000 tonnes for kerosene.
