Fuel Prices Rise 27/litre as Govt Increases Petroleum Taxes

The Federal Government has implemented an upward revision in petroleum product prices, increasing rates by up to PKR 27 per litre for both petrol and high-speed diesel. Notably, the adjustment has been primarily driven by enhanced domestic taxation measures rather than movements in international oil prices.

Under the revised pricing structure approved by Prime Minister Shehbaz Sharif, the ex-depot price of petrol has been fixed at PKR 393.40 per litre, reflecting an increase from PKR 366.60 (approximately 7.3%). Similarly, high-speed diesel has been raised to PKR 380.20 per litre from PKR 353.42, representing an increase of approximately 7.5%.

Government officials have indicated that international petroleum benchmarks remained relatively stable during the review period, thereby confirming that the price escalation is attributable to adjustments in domestic fiscal components, particularly indirect taxation.

A key element of the revision is the increase in the petroleum levy, which has been raised to PKR 107.40 per litre on petrol. The government continues to recalibrate the tax burden across different fuel categories as part of fiscal consolidation measures aligned with commitments under the International Monetary Fund (IMF) programme.

Cumulatively, petroleum levy collections have exceeded PKR 1.2 trillion during the first nine months of the current fiscal year, accounting for approximately 82% of the annual target of PKR 1.468 trillion.

Officials have further indicated that additional fiscal adjustments remain under consideration, including the potential imposition of an incremental PKR 53 per litre levy, which may be apportioned between petrol and diesel in future revisions.

At present, the total tax component on petrol is estimated at approximately PKR 134 per litre, comprising the petroleum levy, customs duty, and climate-related charges. In contrast, diesel is subject to a comparatively lower tax burden of approximately PKR 36 per litre, inclusive of customs duty and climate support levies.

Despite this differential, high-speed diesel continues to exert significant inflationary pressure due to its extensive use in the transport and agricultural sectors, although its current price remains below the recent peak of PKR 520.40 per litre recorded on April 10.

Looking ahead, the government is also preparing to enhance the climate support levy by an additional PKR 2.5 per litre effective July 1, which would increase the charge to PKR 5 per litre in line with broader fiscal commitments under the IMF programme.

In contrast to the upward revision in petrol and diesel prices, kerosene oil and light diesel oil have witnessed downward adjustments following a decline in international oil prices. Kerosene has been reduced by PKR 63.60 per litre to PKR 365, while light diesel oil has been lowered by PKR 29 per litre to PKR 270.

Overall, the government’s pricing strategy reflects an effort to balance revenue mobilisation with subsidy rationalisation, as it continues negotiations under the USD 7 billion IMF programme, with the next review anticipated in early May.