Anticipated by a significant decline in global oil prices and the strengthening of the rupee, the prices of petrol and high-speed diesel (HSD) are expected to dip below the Rs300 per liter threshold in the upcoming price review. This projected reduction, potentially as high as Rs20 per liter for HSD and Rs38 per liter for petrol, would constitute the most substantial single drop in fuel prices.
It’s important to note that the interim government retains the authority to make decisions, especially concerning high-speed diesel. Currently, HSD carries a petroleum development levy of Rs50 per liter, while petrol has a levy of Rs60 per liter.
The government’s objective is to collect approximately Rs869 billion in levies on petroleum products to fulfill budgetary targets and commitments made with the International Monetary Fund (IMF) for the current fiscal year.
If these adjustments come to fruition, it would signify the second consecutive reduction in petroleum prices by the interim government after three consecutive bi-weekly increases. Between August 15 and September 15, petrol and high-speed diesel prices surged significantly, hitting historic highs of Rs331-333 per liter at the retail level.
At present, the government imposes roughly Rs82 per liter in taxes on petrol and Rs73 on high-speed diesel. While the general sales tax on all petroleum products currently stands at zero, there is a petroleum development levy of Rs60 per liter on petrol and Rs50 per liter on HSD, among other fuels.
Over the past month, both petrol and diesel prices have remained above Rs300 per liter. Alongside expensive electricity, fuel has been a key contributor to high consumer prices, which propelled inflation to 31.4 percent in September. The expected reduction in fuel prices could help mitigate the upward trajectory of inflation.
Sources suggest that, based on existing tax rates and other factors, the price of petrol could drop by Rs36-38 per liter. This is due to a substantial 12 percent reduction in its international price, decreasing from $99 per barrel to $87, coupled with a more than 4 percent appreciation of the rupee against the US dollar.
Likewise, the global market price of high-speed diesel has fallen by about $8 per barrel in the past two weeks. With the rupee’s appreciation and stable import cargo premiums, the cost and freight price for HSD is expected to decrease by Rs22 per liter.
It’s crucial to recognize that both petrol and high-speed diesel prices are significant sources of revenue for the government, with substantial monthly sales. Their prices have a direct impact on various sectors of the economy and household budgets, rendering these anticipated reductions particularly meaningful for middle- and lower-middle-class segments.
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