File photo. Asif Hassan—AFP
On Sunday, government announced reduction in prices of most petroleum products in line with international rates
Prime Minister Imran Khan on Sunday said that after the most recent reduction in consumer fuel prices, Pakistan now had the cheapest fuel rates in comparison to other South Asian states.
“India is almost exactly double [Pakistan’s rates]. Bangladesh, Sri Lanka and Nepal are all 50 to 75 percent more expensive than us,” he claimed in a posting on Twitter. The “double” price of India is largely due to the currency exchange difference between the two states.
According to latest currency exchange rates, 1 Pakistani rupee is equivalent to 0.46 Indian rupees. The prices of petrol in India range from 70-78 INR, against the Pakistan government’s newly announced price of Rs. 74.52.
According to Pakistan’s Ministry of Finance, petrol prices have been reduced by Rs. 7.06/liter to Rs. 74.52/liter; kerosene oil by Rs. 11.88/liter to Rs. 35.56/liter; and light diesel oil by Rs. 9.37/liter to Rs. 38.14/liter. There has been no change to the price to high-speed diesel oil. This pricing structure will remain in place until June 30, it added.
But while the government has reduced the consumer price of fuel, it has increased the rate of petroleum levy on petrol by more than 26 percent, potentially increasing its revenues by Rs. 6 billion. The maximum permissible levy on petrol under law is Rs. 30/liter; the government is currently imposing a levy of Rs. 23.76/liter.
According to the prevailing international prices, and the cost of importing fuel to Pakistan, if the government were truly passing on the full benefit of lowered prices to the consumers, the price of petrol should have dropped by Rs. 13.30/liter against the announced Rs. 7.06/liter.
Curiously, there has been no real change to the price of high-speed diesel oil—which has actually increased by a nominal rate of Rs. 0.05/liter. According to daily Dawn, this means the government is imposing Rs. 41.65/liter in taxes—more than double the cost of the fuel itself. It should be noted that high-speed diesel is mostly used in heavy transport vehicles and agricultural engines. Consumption of the fuel has increased in recent weeks due to the wheat harvesting season, perhaps explaining why the government chose not to miss an opportunity to profit off it further.