Pakistan braces for a notable hike in petroleum prices slated for April 2024 as the nation gears up for the upcoming revision scheduled on March 31, 2024, marking the commencement of the first fortnight of the month.
Sources indicate that the surge in petrol prices stems from a notable increase in the premium, soaring from $12.15 per barrel to $13.507 per barrel, translating to a $1.45 per barrel escalation.
If the government opts to transfer the full impact of this rise to the general populace ahead of Eid-ul-Fitr, the price of petrol is projected to catapult from Rs279.75 to Rs289.75 per liter. Moreover, the Inland Freight Equalization Margin (IFEM) on petrol is anticipated to reach Rs5.01 per liter.
Conversely, there might be a marginal decline of Rs1.30 per liter in the price of High-Speed Diesel (HSD), considering the premium on HSD remains steady at $6.50 per barrel, consistent with the previous two reviews. Projections suggest an IFEM of Rs3.76 per liter on HSD.
Meanwhile, expectations indicate stability in the prices of kerosene oil (KERO) and light diesel oil (LDO), both poised to maintain their current rates at Rs188.66 per liter and Rs168.18 per liter, respectively.
The Oil and Gas Regulatory Authority (OGRA) is slated to submit its recommendations regarding petroleum prices on March 31, 2024, with the federal government set to make an announcement based on OGRA’s counsel.
The anticipated surge in petroleum prices is foreseen without the proposed imposition of an 18 percent general sales tax (GST). However, should the GST be enacted, consumers could face an additional burden of Rs50 per liter on petrol.
Currently, the government levies a petroleum levy (PL) of Rs60 per liter, constituting 21.4 percent of the prevailing petrol price of Rs279.75 per liter. Similarly, should the government choose to impose an 18 percent GST on HSD, consumers could witness a spike of Rs53 per liter from the current rate of Rs285.70 per liter.
Since February 2022, the federal government has upheld a zero GST rate on petroleum products, a policy stance that the International Monetary Fund (IMF) has been pressing to reconsider, advocating for the removal of sales tax exemptions on all items, including petroleum products.
An official from the Federal Board of Revenue (FBR) disclosed that there are presently no deliberations underway to introduce sales tax on petroleum products. Nevertheless, estimated revenue from an 18 percent sales tax on petroleum products is anticipated to range between Rs21 billion to 25 billion per month, based on current consumption patterns.
