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Steep rise likely in diesel, petrol prices

Updated February 28, 2018

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Bikers account for 60pc of the total petrol sales in the country.
Bikers account for 60pc of the total petrol sales in the country.

ISLAMABAD: The prices of high-speed diesel (HSD) and petrol for March are likely to increase by almost Rs7 and Rs4 per litre on Wednesday — the highest since October 2014 due to increased rates in the international market.

Interestingly, next month’s prices have been worked out on the basis of higher-than-notified tax rates on the orders of the Ministry of Finance to enable the government to announce a relatively lower rate for political objectives.

In an order, the finance ministry has ordered calculation of prices on the basis of 31 per cent GST on high speed diesel (HSD) and 17pc on all the other products. This is despite the fact that notified-GST rate on HSD at present is 25.5pc, 7.5pc on kerosene and light diesel oil (LDO) and 17pc on petrol.

In addition, the government is also charging Rs8 per litre petroleum levy on HSD, Rs10 per litre on petrol and Rs6 and Rs3 per litre on kerosene and LDO, respectively.

Based on existing tax rates and import prices reported by Pakistan State Oil (PSO), the Oil and Gas Regulatory Authority (Ogra) on Tuesday worked out an increase of Rs6.94 per litre in the prices of HSD and Rs3.56 per litre in motor gasoline (petrol) for March. The regulator also recommended Rs6.28 and Re1 per litre increase in the prices of kerosene and LDO respectively.

However, oil companies would be at will to set the end price of HSD after deciding the quantum of margins for themselves and the dealers in view of a recent government decision to deregulate diesel rates.

As such, if the regulators’ calculations are approved by the prime minister, the price of HSD would go up by 7.2pc, petrol by 4.2pc, kerosene by 8.9pc and LDO by 1.6pc.

In a summary sent to the government, Ogra maintained that the adjustment in prices of petroleum products was required to pass on the impact of fluctuation in international oil prices and the rupee against US dollar during February.

Therefore, on the basis of existing tax rates and imported cost of PSO, Ogra calculated the new ex-depot price of HSD at Rs102.7 per litre instead of existing rate of Rs95.83 per litre. This is the highest HSD rate since October 2014.

For petrol, the ex-depot price was worked out at Rs88.07 per litre instead of existing rate of Rs84.51 per litre, highest since November 2014.

Likewise, Ogra calculated ex-refinery price of kerosene at Rs76.46 per litre — highest since July 2015 – against existing rate of Rs70.18 per litre, showing an increase of Rs6.28 per liter or 8.9pc.

Also, it proposed Rs1 per litre increase in the price of LDO to Rs65.30 instead of existing rate of Rs64.30, up 1.6pc. The summary has been forwarded to the petroleum division that would seek its approval from the prime minister.

Under the practice in vogue, oil prices are revised on the last day of every month. Prime Minister Shahid Khaqan Abbasi has been allowing gradual increase in the price of LDO and kerosene to bridge a price differential with petrol to minimise mixing of the two products.

Interestingly, kerosene is the only regulated petroleum product but is unavailable at fixed rates anywhere in the country while all other products are deregulated and are available reasonably within the price band announced by the government.

The petrol and HSD are two major products that generate most of revenue for the government because of their massive and yet growing consumption in the country. HSD sales across the country are now going beyond 800,000 tonnes per month against monthly consumption of around 700,000 tonnes of petrol.

Published in Dawn, February 28th, 2018