ISLAMABAD: For the second fortnight in a row, the prices of major petroleum products — petrol and high-speed diesel (HSD) — are estimated to drop by up to Rs9.20 per litre for the next fortnight of August, mainly because of the lower international prices.

Informed sources said the prices of petrol and HSD had decreased in the international market by more than $3 per barrel in the last fortnight. Depending on the final exchange rate calculation and existing tax rates, the petrol price is projected to come down by Rs8.50-9.30 and HSD by Rs8-9 per litre.

Officials said the average international petrol price had dropped to $84 per barrel. HSD also declined to about $91 in the last fortnight. During the current fortnight, the import premium on both petrol and HSD generally remained unchanged at about $9 and $5 per barrel, respectively. On the other hand, the local currency lost slightly to the US dollar during the fortnight.

The ex-depot petrol price currently stands at Rs269.43 per litre, and that of HSD at Rs272.77 per litre. On the last fortnightly review on July 31, the government cut the petrol and HSD prices by about Rs6.17 and Rs10.86 per litre after an increase of Rs17.44 and Rs15.74 per litre, respectively, in July. Earlier, between May 1 and June 15, the prices of both petrol and HSD had reduced by about Rs35 and Rs22 per litre, respectively.

Kerosene and light diesel oil are also estimated to become cheaper by Rs10 and Rs5 per litre over the next fortnight.

Petrol is primarily used in private transport, small vehicles, rickshaws, and two-wheelers, and it directly affects the budget of the middle and lower middle classes. On the other hand, most of the transport sector runs on HSD. Its price is considered inflationary as it is mainly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube wells and threshers and particularly impacts the prices of vegetables and other eatables. The drop in petroleum prices is seldom reflected in fares and prices of essential commodities.

The government has jacked up the maximum limit of petroleum levy to Rs70 per litre in the finance bill to collect Rs1.28 trillion in the next fiscal year against Rs1.019tr collection during the last fiscal year, almost Rs150bn higher than the Rs869bn budget target.

Currently, the government is charging about Rs78 per litre tax on petrol and HSD. Although the general sales tax (GST) is zero on all petroleum products, the government charges Rs60 per litre petroleum development levy (PDL) on both products that normally impact the masses. The government is also charging about Rs18 per litre custom duty on petrol and HSD, irrespective of their local production or imports. In addition, about Rs17 per litre distribution and sale margins are going to oil companies and their dealers.

Published in Dawn, August 13th, 2024