ISLAMABAD: Owing to an outstanding pre-condition of the International Monetary Fund (IMF) for increase in petroleum development levy (PDL), the price of high speed diesel (HSD) is estimated to go up by about Rs8 per litre this weekend, while petrol is estimated to be about Rs11 per litre cheaper.
This will strengthen Pakistan’s case for disbursement of $1.18bn when it is to be taken up by the IMF executive board on August 24.
Senior government officials told Dawn that both the major petroleum products — HSD and petrol – were set to go down significantly with effect from August 1, but three major factors — currency depreciation, higher PDL and increase in dealer commission — deprived the consumers of the benefit of international price cut.
These officials said the government had committed a prior action with the IMF to increase PDL by Rs10 per litre on HSD, kerosene and light diesel oil (LDO) and Rs5 per litre on petrol to ensure a uniform rate of Rs15 per litre on all products at the start of August. At present, PDL is Rs10 per litre on petrol and Rs5 each on HSD, kerosene and LDO.
Move part of measures to conform with IMF pre-conditions for release of $1.18bn tranche
The ECC has already approved about 43pc increase in dealers’ commission on petrol and 70pc increase on HSD to Rs7 per litre each that will also have an additional impact of Rs2.10 and Rs2.87 per litre on petrol and HSD respectively. The currency depreciation also negatively impacted the relief otherwise due to consumers due to international price reduction over the past fortnight.
Based on international import price and exchange rate impact, the HSD price was estimated to go down by about Rs3.30 per litre and that of petrol by about Rs19 per litre. However, because of Rs10 per litre increase in PDL and Rs2.87 per litre increase in dealer commission, the HSD rate would instead increase by about Rs8 per litre. The petrol price, on the other hand, will still go down by about Rs11 per litre after negative adjustment of Rs5 per litre increase in PDL and Rs2.10 per litre.
As such the HSD’s ex-depot sale price is estimated to be close to Rs244 for the first fortnight of August instead of Rs236 per litre at present while petrol rate would be around Rs219 per litre instead of slightly over Rs230 at present.
The official said the government could have kept the prices of POL products unchanged for next 15 days through transfer of increase in HSD rate to petrol, but perhaps this was not an option because of the IMF limitations.
On July 14, Prime Minister Shehbaz Sharif had announced a reduction of Rs18 to Rs40 per litre in the prices of various products as international prices went down. This was the first time the PMLN-led coalition government reduced petroleum prices after it came to power in the second week of April.
Between May 26 and July 1, the petrol price had increased by 66pc, or Rs99 per litre, while HSD price went up by 92pc since May 26 from Rs144.15 per litre, up by 132.39 per litre. Likewise, the ex-depot price of kerosene had gone up to Rs230.26 per litre, up by 95pc between May 26 and July 1. Similarly, the ex-depot price of LDO went up to Rs226.15 on July 1, up 80pc from Rs125.56 per litre on May 26, up by about Rs100.59 per litre.
Under the deal with the IMF, the government has to gradually increase PDL on oil products to a maximum of Rs50 per litre to collect Rs855bn during the current fiscal year.
The petroleum levy had come to an end on March 1 price revision as international prices went up and the PTI government decided to not only reduce petroleum prices by Rs10 per litre but also to freeze it for next four months i.e. until end of June. After initial indecision, the PML-N-led coalition government had been increasing petroleum prices since May 15 under the IMF deal.
At present, the GST is zero on all key products, including petrol, HSD, kerosene and LDO against 17pc normal GST. The government is also charging about Rs20 per litre custom duty on petrol and HSD. The previous government had given a commitment in December 2021 to the IMF for Rs4 per litre increase in PL on the first of every month to a maximum of Rs30 per litre, but went back on it on February 28.
Published in Dawn, July 30th, 2022