Tuesday, December 5, 2023

Petrol prices expected to rise up to Rs8

If the government decides not to raise existing tax rates, it may decide to hike petrol prices by up to Rs8 per liter for the next 15 days.

According to reliable sources, the government is still debating whether to increase the petroleum levy with effect from November 1 or November 16, as is now the case. The overwhelming consensus is that an increase in the tax should be implemented by the middle of November in order to maintain a regulated increase in prices as the exchange rate has begun to decline.

Fuel prices are expected to rise by approximately Rs6 per liter based on current tax rates, import parity prices, and exchange rates, according to estimates by the Oil & Gas Regulatory Authority (Ogra) and the Petroleum Division. The price of high-speed diesel (HSD) is expected to rise by approximately Rs8 per liter. The increase in prices for other products such as kerosene and light diesel oil was also projected to be in the same range, mostly as a result of the decline in the value of the dollar and the rise in the price of international oil over the last 10-12 days of import cargoes.

An official stated that the government was considering hiking the gasoline duty by Rs4 per liter, either on Sunday or on November 16, and that the government’s ability to revive its program would be dependent on its interactions with the International Monetary Fund.

Early this week, Energy Minister Hammad Azhar stated that the government was under pressure to reduce or eliminate taxes on petroleum-based goods. The government had set a target of Rs610 billion in annual income collection from petroleum products, with an average monthly collection rate of around Rs50 billion. However, the government’s cumulative real revenue collection in the first four months was approximately Rs50 billion. The government presently levies a petroleum duty of approximately Rs5.62 per liter on petrol and Rs5.14 per liter on high-speed diesel.

In addition, the government levies a customs charge of approximately Rs9.29 per liter and Rs8.81 per liter on petrol and high-speed diesel, respectively, in addition to a GST of Rs9 and Rs13 per liter on these two goods.

The final decision on the price rise would be revealed by the Ministry of Finance on Sunday, following negotiations with the Prime Minister and other stakeholders.

Ex-depot petrol prices are currently Rs137.79 a liter at the time of writing this. The product is mostly utilized in private transportation, small vehicles, rickshaws, and two-wheelers, and its price has a direct impact on the budgets of middle- and lower-middle-class families, as well as the economy as a whole. At the time of writing, the ex-depot price of HSD is Rs134.48. The fact that it is predominantly utilized in large transport vehicles, trains, and agricultural engines such as trucks, buses, tractors, tube-wells, and threshers causes its price to be deemed extremely inflating.

Now, the ex-depot price of Light Diesel Oil (LDO) stands at Rs108.35 per liter, with kerosene coming in as the second most expensive fuel at Rs110.26 per liter. Generally speaking, when it comes to kerosene, it is used by unscrupulous elements for combining with gasoline and, to a lesser extent, for lighting in remote areas. LDO is employed in a variety of applications, including grain mills and a few power plants.

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