ISLAMABAD – In a favorable turn for consumers, the prices of petrol and high-speed diesel (HSD) are anticipated to fall by approximately Rs6.50 to Rs7.50 per litre on May 31. This decrease is driven by a bearish trend in the international market, despite a minor exchange rate loss.

According to informed sources, the prices of petrol and HSD in the international market have declined by about $3.25 and $2.10 per barrel, respectively, over the last fortnight. This follows a previous fortnight’s drop of $8.7 and $4.3 per barrel for petrol and HSD, respectively.

Based on the final calculation of the Inland Freight Equalisation Margin (IFEM), the petrol price is projected to decrease by Rs7.25 per litre, while HSD is expected to drop by Rs6.25 per litre. The import premium on petrol has also reduced by around 7% in the last fortnight, decreasing from $10.30 to $9.70 per barrel.

Despite the rupee depreciating slightly by 10 paise against the US dollar during the fortnight, the net impact is still anticipated to result in a reduction of around Rs7 per litre for petrol, bringing it down from the existing ex-depot rate of Rs273.10. Similarly, the HSD price, having dropped by about $2.10 per barrel in the international market, is estimated to decrease by Rs6.25 per litre from the current rate of Rs274.08 per litre, pending final exchange rate adjustments and IFEM calculations.

Officials reported that the price of petrol in the international market has fallen to approximately $95 per barrel from the earlier rate of $98.27, while HSD has reduced to $97 from $99.12 per barrel. These declines follow a significant reduction in prices on May 16, where petrol and HSD prices fell by Rs15.93 and Rs7.88 per litre, respectively.

The government has already achieved the maximum permissible limit of Rs60 per litre for the petroleum levy on both petrol and HSD, collecting Rs720 billion in the first nine months ending March 31. The budget target set for the current fiscal year aims to collect Rs869 billion as petroleum development levy (PDL) on petroleum products, in line with commitments made to the International Monetary Fund (IMF).

Higher petroleum and electricity prices have been major contributors to inflation. Petrol, primarily used in private transport, small vehicles, rickshaws, and two-wheelers, directly affects the budget of the middle and lower-middle classes. Conversely, HSD prices have a broader inflationary impact, being crucial for heavy transport vehicles, trains, and agricultural machinery such as trucks, buses, tractors, tube wells, and threshers, thereby influencing the prices of vegetables and other essential goods.

Currently, the government charges about Rs82 per litre in taxes on petrol and HSD, with a Rs60 per litre PDL on both products. General sales tax (GST) is zero on all petroleum products, but the government charges Rs50 per litre for high-octane blending components and 95RON petrol, and about Rs19-20 per litre customs duty on petrol and HSD.

Petrol and HSD remain the major revenue generators, with monthly sales of about 700,000-800,000 tonnes, compared to a modest demand of 10,000 tonnes for kerosene.

This reduction in fuel prices is expected to provide some respite to consumers and mitigate inflationary pressures, particularly benefiting the middle and lower-middle classes who are heavily reliant on petrol for transportation and everyday activities.

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