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Wednesday, May 22, 2024

Federal Government Raises Petrol and Diesel Prices

Petrol will now cost Rs293.94 per liter, up by Rs4.53 from its previous price, while HSD will be priced at Rs290.38 per liter, reflecting a hike of Rs8.14.

The federal government has announced an increase in the prices of petrol and high-speed diesel (HSD) effective from Monday, citing fluctuations in global oil prices. Petrol will now cost Rs293.94 per liter, up by Rs4.53 from its previous price, while HSD will be priced at Rs290.38 per liter, reflecting a hike of Rs8.14. This decision comes amidst rising oil prices in the international market over the last fortnight.

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In a statement, the finance ministry justified the price hike, attributing it to the recent surge in international oil prices. This increase is expected to impact various sectors, particularly transportation and agriculture, as HSD is extensively used in heavy transport vehicles, trains, and agricultural engines. Furthermore, the hike in petrol prices may burden middle and lower-middle-class households, as petrol is predominantly used in cars, motorcycles, and other forms of private transport.

Government’s Fiscal Measures and Future Projections

Currently, the government levies a Rs60 per liter tax on most petroleum products, and the International Monetary Fund (IMF) is advocating for the imposition of a general sales tax (GST) of Rs18 per liter.

The absence of a GST on petroleum products coupled with the existing taxes contributes to the government’s budget target of collecting Rs869 billion as a levy on petroleum products for the current fiscal year. However, the introduction of additional taxes could further inflate fuel prices in the coming months, impacting the cost of living and transportation.

The recent surge in international oil prices, with petrol and HSD prices increasing by $4 and $4.50 per barrel, respectively, has prompted the government to adjust fuel prices accordingly. Despite a decrease in the import premium on petrol, the overall impact on fuel prices remains significant.

Pakistan, heavily reliant on oil imports, faces challenges stemming from a balance of payments crisis and soaring inflation. The knock-on effect of higher fuel prices on transportation costs and the overall economy is expected to exacerbate these challenges, with a decline in petroleum product sales already observed in recent months.