Govt considers up to Rs10 per litre increase in petrol prices

WEB DESK: The government is contemplating a substantial hike in petrol prices, possibly reaching up to Rs10 per litre, effective April 1, 2024. This move is poised to further burden the public financially.

This surge in petrol prices is attributed to a rise in the premium, which has escalated from $12.15 per barrel to $13.507 per barrel, indicating an increment of $1.45 per barrel.

Should the government decide to fully implement this adjustment, the price of petrol is set to exceed that of high-speed diesel (HSD), escalating from Rs279.75 to Rs289.75 per litre.

Additionally, an Inland Freight Equalization Margin (IFEM) of Rs5.01 per litre is anticipated on petrol.

Conversely, there may be a slight reduction of Rs1.30 per litre in the price of HSD, as the premium on HSD remains at $6.50 per barrel, consistent with the previous two petroleum product reviews. IFEM on HSD is expected at Rs3.76 per litre.

The prices of kerosene oil (KERO) and light diesel oil (LDO) are projected to remain unchanged at Rs188.66 per litre and Rs168.18 per litre, respectively.

The Oil and Gas Regulatory Authority (OGRA) is slated to submit its recommendation on petroleum prices on March 31, 2024, following which the federal government will announce the revised prices based on OGRA’s suggestions.

It’s worth noting that the anticipated increase in petroleum product prices does not currently include the proposed imposition of an 18 per cent general sales tax (GST). However, if GST is enforced, petrol prices could surge by an additional Rs50 per litre.

Presently, the government imposes a petroleum levy (PL) of Rs60 per litre, constituting 21.4 per cent of the current petrol price of Rs279.75 per litre.

Furthermore, if the government opts to impose an 18 per cent GST on HSD, the price could rise by Rs53 per litre from the current Rs285.70 per litre.

Since February 2022, the federal government has upheld a zero GST rate on petroleum products.

Despite the International Monetary Fund (IMF) advocating for the removal of sales tax exemptions on all items, including petroleum products, there are presently no proposals under consideration to levy sales tax on petroleum products, as confirmed by an official from the Federal Board of Revenue (FBR).

Nevertheless, it’s estimated that imposing an 18 per cent sales tax on petroleum products could yield revenue ranging between Rs21 billion to Rs25 billion per month, based on current consumption levels.