New petrol price may go up to PKR 309 per liter in Pakistan following steep fall in rupee value and expected imposition of sales tax on petroleum products.
According to analysis of expected petroleum prices after changing exchange rate scenario, Fahad Rauf, Head of Equity Research at Ismail Iqbal Securities outlined a scenario of petroleum prices after new exchange rate and with or without imposition of sales tax on petroleum products.
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As per his analysis, the petrol rate may be increased by 44 per cent to PKR 309 per liter from existing PKR 215 per liter after considering current international prices and dollar/rupee, petroleum levy and sales tax imposition. Similarly, in the same scenario the rate of diesel may also go up by 50 per cent from PKR 228 to PKR 341.
Rauf also calculates the prices of petroleum products with latest decline in rupee value. According to him, the petrol rate may go up by 23 per cent to PKR 264 per liter from existing PKR 215 considering current international prices and dollar/rupee, petroleum levy but without sales tax imposition. Similarly, rate of diesel may also go up in same scenario by 28 per cent to PKR 291 per liter from existing PKR 228.
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The analyst has estimated the petroleum prices on the basis of exchange rate as of January 26, 2023 when rupee crashed to record low PKR 255.43 against dollar after posting a historic single day fall PKR Rs24.54. However, the rupee has further declined to make new historic low of PKR 262.60 to the dollar in interbank foreign exchange market on January 27, 2023.
The country reviews the petroleum prices on fortnightly basis and the next review is scheduled on January 31, 2023. However, the prices may go up before the scheduled announcement in case the government slapped sales tax or levy through the ordinance. Reportedly, the government is planning to introduce mini budget for generating additional PKR 280-300 billion as demanded by the IMF.
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The IMF loan program under Extended Fund Facility (EFF) was stalled for the past many months and it derailed external position of the country.
According to the announcement the prices effective from January 16, 2023 till January 31, 2023 are: High speed diesel price is at Rs227.80. The price of petrol is Rs214.80. The price of kerosene oil is to Rs171.83. And the price of light diesel oil is Rs169.
Experts were believing that the government would increase the prices because of IMF demand to raise the revenue. But the government despite the pressure made last two fortnight decisions to keep the prices unchanged.
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The further increase in petroleum prices would make it difficult for masses to manage their day to day affairs. Pakistan is highly dependent on imported fuel to meet domestic demand.
The previous government of PTI had kept both the petroleum levy and sales tax at zero in order to provide relief to the masses. The PTI government also provided a huge subsidy on prices of petroleum products in order to lower the rates and provide relief to the masses.
However, former Prime Minister Imran Khan was removed through a vote of no-confidence motion on April 10, 2022. Since then the new coalition government led by PML-N increased the prices of petroleum products sharply.
The present government in the budget estimated to collect Rs855 billion as petroleum levy during the fiscal year 2022/2023.
