ISLAMABAD: After getting clearance from the prime minister, the finance ministry announced on Wednesday an increase of up to nine per cent in the prices of all petroleum products with immediate effect.

As a result, the prices of all products touched the three-year highest level last witnessed in October 2014.Oil prices are revised on the last day of every month for the next month.

The increase in diesel prices has a direct bearing on transportation costs and overall rate of inflation.

The ex-depot price of high-speed diesel (HSD) was increased by Rs2.62 (2.73 per cent) from Rs95.83 to Rs98.45 and that of petrol by Rs3.56 (4.21pc) from Rs84.51 to Rs88.07 per litre.

The prices of kerosene and light diesel oil (LDO) were jacked up by Rs6.28 (about 8.94pc) from Rs70.18 to Rs76.46 and Re1 (1.55pc) from Rs64.30 to Rs65.30 per litre, respectively.

Even though the government has deregulated the petroleum prices almost six months ago, it continues to announce ex-depot price based on a working paper from the Oil and Gas Regulatory Authority (Ogra) under a price formula that keeps substantially higher tax rates than notified tax rates.

Except for HSD, the government passed on the full impact of price increase proposed by Ogra for petrol, kerosene and LDO. In doing so, the tax rates were jacked up significantly on kerosene and LDO.

Ogra had proposed Rs6.94 per litre increase in HSD price, but the government allowed it by Rs2.62, after reducing GST rate from 25.5pc.

Prime Minister Shahid Khaqan Abbasi has been allowing gradual increase in the prices of LDO and kerosene that his predecessor Nawaz Sharif kept unchanged at Rs44 per litre for almost four years ‘to protect poor people’. Mr Abbasi believed that the lower price of low quality product kerosene was resulting in its mixing with petrol and diesel due to huge price differential.

Interestingly, kerosene is the only regulated petroleum product but 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.

HSD sales across the country are now going beyond 800,000 tonnes per month against monthly consumption of around 700,000 tonnes of petrol. The sales of kerosene and LDO are generally less than 10,000 tonnes per month.

Published in Dawn, March 1st, 2018