Pakistan may soon announce sharp increase in petroleum prices

Pakistan may soon announce sharp increase in petroleum prices

Pakistan may soon announce sharp increase in petroleum prices with the expected imposition of sales tax, sources said on Wednesday.

They said that during the ongoing visit of International Monetary Fund (IMF) the local authorities have been clearly asked to impose the sales tax on petroleum products.

The scheduled announcement is due on February 15, 2023 for next fortnight. But the sources said that the government may announce the revision in petroleum prices ahead the schedule.

The country kept the sales tax at zero per cent for the past couple of years in order to facilitate general public amid higher prices of petroleum products.

READ MORE: Significant jump in petroleum prices in the offing with expected sales tax imposition

The sources said that with the implementation of 17 per cent sales tax the petroleum prices would jump sharply.

The latest prices of petroleum products were updated and applicable from February 01, 2023, which are: petrol Rs249.80 per liter; high speed diesel Rs262.80 per liter; kerosene oil Rs189.83 per liter; and light speed diesel Rs187 per liter.

On January 29, 2023, the government increased the prices of petrol and high speed diesel (HSD) by Rs35 per liter each and the rates of kerosene oil and light diesel oil (LDO) have been increased by Rs18 per liter each, according to an announcement by Finance Minister Ishaq Dar.

READ MORE: Russian oil starts arriving Pakistan by April 2023

Media reports suggested, another increase is predicted since a cash-strapped country opted to implement sales tax on petroleum items as an additional measure.

The international lending agency is demanding the country to raise energy and gas tariffs, introduce a general sales tax (GST), and privatize some state-owned firms.

Fearing another massive hike in petroleum prices, many fuel stations have started hoarding and have refused retail sales.

Experts believed that the government had partially increased the prices and remaining raise would be seen in coming days.

“Petrol and Diesel price increased by Rs 35 per litre, in-line with expectations. This is only a partial increase as it does not incorporate recent exchange rate depreciation,” said Fahad Rauf, Head of Equity Research at Ismail Iqbal Securities.

He said that another increase in petroleum prices would be announced in mid of February.

In his previous analysis before the recent increase, Fahad Rauf estimated that the petrol rate may be increased by 44 per cent to PKR 309 per liter from 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.

READ MORE: Oil companies highlight severe impact of PKR depreciation

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.

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.

READ MORE: Pakistan petroleum sales plunge by 19pc in 7MFY23