Fuel prices to soar in next fortnight

The domestic prices of diesel and petrol are likely to hike by Rs16.89 and Rs4.55 per litre, respectively, in the next fortnight, The News reported Thursday. However, the petroleum levy (PL) and General Sales Tax (GST) will remain excluded from this price hike.

The price of diesel will witness a massive increase from July 1, 2022, if the government charges Rs10/litre on account of PL on diesel and petrol along with the GST.

The ex-depot price of petrol has been worked out at Rs238.44 for the next fortnight compared to Rs233.89/litre for the current fortnight, an increase of Rs4.55/litre.

If Rs10 PL and 17% GST are added, the petrol price will rise to around Rs290/litre from July 1, 2022.

The ex-depot price of diesel has been calculated at Rs280.20/litre for the next fortnight against Rs263.31/litre in the current fortnight, which translates into an increase of Rs16.89/litre. If Rs10 PL and 17% GST is included, the price of diesel may go up to Rs340/litre for the local consumers.

The government passed Rs50 PL for every litre of petroleum products in the Finance Bill 2022-23 on Wednesday, as demanded by the International Monetary Fund (IMF).

The ex-depot prices of both fuels have been calculated based on their international market rates from June 14-28.

During the period under review, the price of crude oil fell by $2.59/barrel; however, the price of products i.e., diesel and petrol went up by $3.66 per barrel.

The fall in the prices of crude oil won’t benefit the consumers in the domestic market as the prices of diesel and petrol are linked to the global prices of these products rather than crude oil under the import parity price (IPP) mechanism.

According to sources in the sector, the government would pass on the impact of international prices to consumers coupled with Rs10/litre PL.

It is expected that the government won’t impose GST. However, if slapped, it wouldn’t be charged at the high rate of 17% in the next fortnight and would be increased gradually. The local prices of diesel and petrol have peaked at their highest levels in the last one month after being kept frozen for three months as per the policy of the previous government to pay subsidy for keeping the prices stabilised.

The present government, however, abolished the subsidies on fuel prices on the IMF to re-qualify for Extended Fund Facility (EFF). The price hike has been the main issue between Pakistan and the IMF as part of an agreement to withdraw subsidies in the oil and power sectors to reduce the fiscal deficit before the annual budget is presented next month.

Ousted Prime Minister Imran Khan had given the subsidy in his last days in power to cool down public sentiments in the face of double-digit inflation, a move the IMF said deviated from the terms of the 2019 deal. In addition to the $900 million tranche, the resumption of the IMF loan programme will also unlock other external financings for the cash-strapped country, whose foreign reserves cover is still thin.

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