ISLAMABAD, May 15, 2025 – Consumers across Pakistan should brace for a potential hike in fuel costs, as the federal government is likely to approve an increase of over Rs 4 per litre in the prices of both petrol and diesel, starting May 16.
This move aims to generate approximately Rs 35 billion to address various financial concerns in the petroleum sector, including refinery sustainability and margin adjustments for Oil Marketing Companies (OMCs).
According to official sources and documentation, petroleum products such as petrol, diesel, kerosene, and light diesel oil (LDO) have been categorized as “exempt” under the Finance Act for the fiscal year 2024–25. This exemption, while offering some consumer relief, has shifted the burden of unrecovered input sales tax—estimated at Rs 35 billion—onto refineries and OMCs. Due to strict price controls set by the Oil and Gas Regulatory Authority (OGRA), these costs cannot be passed directly to consumers.
To resolve the issue, a proposal was prepared to introduce a 3–5% sales tax on petrol and diesel. However, this plan was put on hold after consultations with the International Monetary Fund (IMF) failed to produce a consensus on lower GST rates. Officials warned that implementing the full 18% GST would cause a spike of around Rs 45 per litre—an increase deemed both politically and economically risky.
In the meantime, OGRA has endorsed an increase in per-litre profit margins: Rs 1.13 for OMCs and Rs 1.40 for petroleum dealers. These adjustments are intended to sustain the oil supply chain amidst growing financial strain.
To manage the situation, several proposals have been forwarded to the Economic Coordination Committee (ECC). These include recovering the Rs 34 billion shortfall through the Inter Freight Equalisation Margin (IFEM) over 12 months, increasing freight charges for Attock Refinery Limited (ARL), and using IFEM as a backup in case sales tax exemptions persist into FY 2025–26.
The cumulative price impact of these changes is expected to be Rs 4.12 per litre, comprising unadjusted taxes and revised margins. The decision, if implemented, will directly affect the retail prices of petrol and diesel, further influencing transport and consumer goods costs nationwide.
As Pakistan navigates economic pressures, any change in petrol and diesel pricing will be closely watched by businesses, motorists, and the general public alike.