KARACHI: Given the small difference between domestic and international rates and the potential for an increase in the petroleum levy on diesel, a decrease in the price of petroleum products in the upcoming two weeks is unlikely.
On Wednesday, representatives of the oil industry suggested that the government increase the price of diesel in order to collect a higher petroleum levy in order to satisfy the International Monetary Fund’s (IMF) demand to secure the loan program that has been delayed.
Oil Industry:
According to estimates from the oil industry, the average price of gasoline for the upcoming fortnight will be lower than its current price of Rs214.80/litre, falling by Rs2/litre, while the average price of diesel will also be lower. In its most recent review, the federal government reduced the cost of petroleum products. High-speed diesel was reduced in price by Rs7.5/litre to Rs227.80/litre, but the petroleum levy was raised to Rs30/litre in order to raise more money from the fuel.
In order to increase the government’s tax collection, the price of gasoline was also reduced by Rs10/litre, to Rs214.80/litre, and a petroleum levy of Rs50/litre was added.
However, there is no sales tax levied by the government on petroleum products.
People in the oil industry claimed that because there hasn’t been a significant drop in Free on Board (FOB) prices, there would only be a small change in the price of petroleum products for domestic consumers.
Petroleum Tax:
However, they warned that the price of diesel might increase if the government raised the petroleum tax in an effort to win over the IMF and revive its programme, for which it was making great efforts to shore up the dwindling foreign exchange reserves.
According to the most recent information made public by the central bank on Thursday, the State Bank of Pakistan’s reserves have decreased to $5.8 billion.
According to sources with direct knowledge of the situation, “if the government stays in power for the remainder of its term, it has to abide by the IMF’s conditions.” They added that if the government was convinced that it would be ousted in January 2023, it might not raise the petroleum tax on diesel.
They cited recent comments made by government officials in support of their claim that the government would probably comply with the requirements imposed by the IMF in order to restart the loan programme that had stalled. Oil prices must be adjusted for exchange losses, but the government does not necessarily need to do so within the next two weeks.
They made the point that domestic oil prices have now turned into a political issue, just like they did when the Pakistan Tehreek-e-Insaf (PTI) government was in office and reduced the petroleum levy and sales tax to zero, which effectively frozen oil prices.
