Following a series of consecutive reductions in petrol prices, the federal government is now poised to reverse the relief by increasing the prices of petrol and high-speed diesel (HSD) by Rs. 9.84 and Rs. 7.54 per liter, respectively. This anticipated hike, expected to be accompanied by an increase in the petroleum levy, reflects the rising international oil prices and the government’s commitment to meeting International Monetary Fund (IMF) requirements.
Details of the Anticipated Price Hike
The impending price adjustment is not just limited to the base prices of petrol and diesel. Media reports suggest that the government is likely to raise the petroleum levy by Rs. 5 per liter. If implemented, this will result in a cumulative price increase of Rs. 12.54 per liter for petrol and Rs. 14.84 per liter for HSD. Consequently, the new prices will be Rs. 270.07 per liter for petrol and Rs. 282.73 per liter for HSD.
Recent Trends in Fuel Prices
On June 15, 2024, the federal government announced a reduction in petrol prices by Rs. 10.20 per liter, bringing the new rate to Rs. 258.16 per liter, down from Rs. 268.36 per liter. Diesel prices were also reduced by Rs. 2.33 per liter, resulting in a new rate of Rs. 267.89 per liter compared to the previous Rs. 270.22 per liter. These reductions provided temporary relief to consumers amidst fluctuating international oil prices.
However, the recent upward trend in global oil prices necessitates a revision of domestic fuel prices. The increase in international oil prices has a direct impact on the cost of importing fuel, which the government must pass on to consumers to maintain fiscal balance.
Impact of the Fiscal Budget 2024-25
The new fiscal budget for 2024-25 included an increase in the petroleum levy on petrol and diesel from Rs. 60 per liter to Rs. 80 per liter. This decision underscores the government’s strategy to boost revenue through indirect taxation while reducing subsidies on fuel consumption. The increase in the petroleum levy, combined with the anticipated price hike, is expected to place a significant burden on the salaried and middle-class populations.
Prime Minister’s Acknowledgment
The Prime Minister has acknowledged the upcoming price hike, stating that the increase will be implemented in phases rather than all at once. This phased approach aims to mitigate the immediate financial impact on consumers while ensuring the government meets its fiscal targets and adheres to IMF-recommended reforms.
IMF Reforms and Economic Challenges
The government’s decision to increase fuel prices and the petroleum levy is influenced by the need to secure an upcoming loan program with the IMF. The IMF has recommended these reforms as part of a broader strategy to stabilize Pakistan’s economy, which includes measures to increase revenue through taxation and reduce subsidies on consumption.
Previously, the Rs. 60 per liter levy was introduced to appease the IMF and meet its conditions for financial assistance. With the current economic challenges and the necessity to generate additional revenue, the government has stretched this threshold further.
The federal government’s decision to increase petrol and high-speed diesel prices reflects the complex economic landscape and the need to adhere to international financial commitments. While the anticipated price hike will undoubtedly strain household budgets, particularly for the salaried and middle-class segments, it is a necessary step to align domestic fuel prices with international trends and secure financial stability through IMF support. As the government navigates these challenges, the phased implementation of price increases aims to balance fiscal responsibility with the need to minimize economic hardship for the population.
Afsheen Gohar is a seasoned writer with a wealth of experience in crafting authentic and well-researched articles. Her dedication to delivering high-quality content is evident in her work, where she combines a passion for storytelling with a commitment to accuracy and depth. Afsheen’s writing reflects her ability to engage readers with compelling narratives while providing valuable insights on a diverse range of topics.
