The federal government has recently announced a significant increase in the prices of petrol and high-speed diesel (HSD) in Pakistan. Effective from Monday, petrol will now cost Rs293.94 per liter, marking an increase of Rs4.53 from its previous price. Similarly, the price of HSD will be set at Rs290.38 per liter, reflecting a hike of Rs8.14.
This decision comes as a response to the fluctuations in global oil prices observed over the last few weeks. In a statement released by the finance ministry, the price adjustment was justified due to the recent surge in international oil prices. The implications of this price hike are expected to impact various sectors, particularly transportation and agriculture, as HSD is widely used in heavy transport vehicles, trains, and agricultural engines.
The increase in petrol prices may pose a challenge for middle and lower-middle-class households, as petrol is predominantly used in cars, motorcycles, and other private vehicles. The government’s fiscal measures include a Rs60 per liter tax on most petroleum products, with the International Monetary Fund (IMF) advocating for the imposition of a general sales tax (GST) of Rs18 per liter.
The absence of a GST on petroleum products, coupled with 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 lead to a further rise in fuel prices in the coming months, affecting the cost of living and transportation.
The recent surge in international oil prices has prompted the government to adjust fuel prices accordingly, despite a decrease in the import premium on petrol. Pakistan, being heavily reliant on oil imports, faces challenges related to a balance of payments crisis and soaring inflation. The impact 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.
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