Another big fuel price shock in the offing

Published September 14, 2023
People wait for their turn to get fuel at a petrol station in Peshawar on January 30. — Reuters
People wait for their turn to get fuel at a petrol station in Peshawar on January 30. — Reuters

ISLAMABAD: With no let-up in the rising energy rates, the prices of petroleum products are estimated to rise again later this week owing to a combination of currency depreciation and higher international oil prices.

Informed sources told Dawn that the prices of both major petroleum products — petrol and high-speed diesel (HSD) — could go up by about Rs10-14 and Rs14-16 per litre, respectively, on Sept 15 for the next fortnight, while kerosene price would also get costlier by about Rs10 per litre, based on the existing tax rates and import parity price.

The rupee initially depreciated by Rs4.5 against the dollar in the first 10 days of current fortnight (from Rs299 to Rs304) before sliding below Rs300, but in the meanwhile, benchmark international Brent prices went beyond $92 per barrel on Wednesday against $88 in the first week of September, thus nullifying whatever little space the exchange rate might have created.

On top of this, the government would also pass on to consumers about 88 paise per litre impact of increase in sale margins for petroleum dealers and marketing companies already approved by the Economic Coordination Committee (ECC) of the cabinet last week.

Petrol, diesel prices likely to cross Rs320 and Rs325 per litre

The sources said the import parity price for petrol, diesel and kerosene had increased by about Rs13, Rs14 and Rs10 per litre, respectively, since Sept 1, but sale prices were estimated to go up by Rs13, Rs16 and over Rs10 per litre as per product imports by Pakistan State Oil. Jet fuels are also estimated to be costlier by Rs10 per litre.

As such, the petrol and diesel prices are estimated to cross Rs320 and Rs325 per litre, respectively. The kerosene rate would be on the higher side of Rs240 per litre.

Most of the transport sector runs on HSD. Its price is considered highly inflationary as it is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube wells and threshers, and particularly adds to the prices of vegetables and other eatables.

Petrol, on the other hand, is mostly used in private transport, small vehicles, rickshaws and two-wheelers and has a direct bearing on the budget of middle- and lower-middle class.

The increase in prices of petroleum products came on the heels of over 27.4 per cent increase in the August rate of inflation that would also have a lag effect on general prices in the country over the coming days and weeks.

At present GST is zero on all petroleum products, but the government is charging Rs60 per litre petroleum development levy (PDL) on petrol and Rs50 each on HSD and high octane blending component and 95RON petrol. The government is also charging about Rs18 to Rs22 per litre customs duty on petrol and HSD.

Petrol and HSD are the major revenue spinners with their monthly sales of about 700,000-800,000 tonnes per month compared to just 10,000 tonnes of monthly demand for kerosene.

Published in Dawn, September 14th, 2023

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