In a recent development, informed sources have indicated that international market prices for major petroleum products have decreased by approximately $2 to $3 per barrel over the past fortnight. This decline is expected to translate into a reduction in domestic fuel prices, with petrol projected to fall by Rs2.90 per litre and high-speed diesel (HSD) by Rs8.50 per litre.
The average international price for petrol has dropped to $87.50 per barrel from $89.50, while HSD has decreased to $94 from $96.93. Additionally, the import premium on both products has seen a reduction, with petrol’s premium falling to $8.80 from $9 and HSD’s dropping to $5 from $6.50 per barrel. Despite these changes, the exchange rate has remained relatively stable.
Currently, the maximum limit for the petroleum levy has been increased to Rs70 per litre, as outlined in the latest Finance Bill. This adjustment aims to raise Rs1.28 trillion in the upcoming fiscal year, compared to the Rs960 billion collected last year. This amount exceeds the previous budget target of Rs869 billion by nearly Rs91 billion.
At present, the ex-depot price for petrol stands at Rs275.60 per litre, while HSD is priced at Rs284 per litre. With the anticipated reductions, the new price for petrol will be slightly above Rs272 per litre, and HSD will approach Rs275 per litre, assuming no additional increases in the petroleum levy.
Petrol is primarily used for private transport, small vehicles, rickshaws, and two-wheelers, impacting the budgets of middle- and lower-middle-class families. Conversely, HSD is predominantly used in the transport sector, including heavy vehicles such as trucks, buses, and agricultural machinery. Changes in HSD prices can significantly affect the cost of transportation and, consequently, the prices of essential goods, including vegetables.
Historically, declines in petroleum prices have not always been reflected in fares or the prices of essential commodities. This trend is expected to continue despite the recent price drop.
Notably, petrol and HSD prices had increased significantly in June and July, with cumulative rises of Rs17.44 and Rs15.74 per litre, respectively. In contrast, between May 1 and June 15, there were substantial reductions of Rs35 and Rs22 per litre for petrol and diesel, respectively.
Currently, the government imposes about Rs78 per litre in taxes on both petrol and HSD, which includes a Rs60 per litre petroleum development levy (PDL). Although the goods and services tax (GST) on petroleum products is zero, this levy continues to impact consumers significantly.
