ISLAMABAD – The federal government has implemented a steep increase in the prices of petroleum products, raising the cost of petrol and High-Speed Diesel (HSD) by approximately Rs 15 per litre. The move, which took effect on May 9, is a direct result of the government’s commitment to the International Monetary Fund (IMF) to bolster tax collection through the Petroleum Levy.
The Breakdown: New Rates at the Pump
The price adjustment has pushed both major fuel types past the Rs 414 mark, creating a new floor for transportation and energy costs across the country.
• Petrol: Increased from Rs 399.86 to Rs 414.78 per litre.
• High-Speed Diesel (HSD): Increased from Rs 399.58 to Rs 414.58 per litre.
While the ex-refinery price of HSD rose by Rs 10.47 and petrol by a marginal Rs 1.08, the primary driver was a Rs 13.91 per litre hike in the Petroleum Levy (PL). The levy on petrol now stands at Rs 117.41, while the diesel levy has jumped to Rs 42.60.
IMF Commitments and Revenue Targets
Petroleum Minister Ali Pervaiz Malik, in a televised address alongside Finance Minister Muhammad Aurangzeb, defended the decision as a necessary step to satisfy the IMF ahead of Pakistan’s upcoming board review.
The government is currently chasing an annual revenue target of Rs 1.4 trillion from petroleum levies. Data shows that Rs 1.3 trillion was already collected during the July–April period of FY26. To close the remaining gap, the IMF has authorized the government to phase in an additional Rs 53 per litre increase in the levy.
“While there was no major fluctuation in global markets, we had to increase rates due to our commitments,” Minister Malik stated. He assured the public that the government would be “much faster” in cutting prices once international oil rates decline.
Mitigation Efforts and Economic Strain
In an attempt to soften the blow, the government slashed the Inland Freight Equalization Margin (IFEM). The IFEM for HSD was reduced by over 50%, dropping from Rs 17.14 to Rs 7.76 per litre. However, analysts suggest these minor adjustments do little to offset the broader inflationary pressure.
The timing of the hike is particularly sensitive. The weekly Sensitive Price Index (SPI) has already surged by 15.16% year-on-year as of early May. Economists warn that this latest fuel spike will trigger a “cost-push” inflation cycle, driving up the prices of food, essential goods, and public transport.
Availability Guaranteed
Despite the price volatility, Minister Malik emphasized that the government has taken “timely measures” to ensure there are no supply disruptions or shortages of petroleum products across the country.
As the public braces for the secondary impact on utility bills and groceries, all eyes remain on the international market, with the government promising that current high rates are purely a reflection of fiscal obligations rather than market trends.