Component-wise breakdown of petrol price in Pakistan

As the government maintained petrol prices in its announcement on October 31, it reduced Inland Freight Equalisation Margin, but raised petroleum development levy to Rs50 – the highest permissible limit – to meet a key condition of the International Monetary Fund (IMF) programme.

Business Recorder takes a look at the component-wise breakdown of the petrol price in Pakistan, which currently stands at Rs224.8 per litre.

During discussions with the IMF after the new government took charge, the leadership agreed to earn Rs750 billion through petroleum levy. Dr Miftah Ismail, then the finance minister, had said the levy would be raised in a phase-wise manner.

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Now, it is at its highest level.

On June 29, 2022 the National Assembly had approved the amended Finance Bill 2022 which included imposition of petroleum levy up to Rs50 on POL [petroleum, oil and lubricant] products.

The government first imposed PDL in July and by August 1, it had raised the level to Rs20 per litre. In late August, global oil prices saw a plunge and the cost of imported fuel fell. The government took this opportunity to steeply hike the levy to Rs37.5 per litre.

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In last days of September, the government cut the levy marginally to Rs37.42 and in October, it was further reduced to Rs32.42 per litre. In mid-October, the PDL again saw a sharp hike to Rs47.26 per litre. This became possible due to further drop in global oil prices.

Finally on October 31, 2022, the government hiked the PDL to its maximum level of Rs50 per litre.

With petroleum sales witnessing a 8% increase in October (0.68 million tonnes) on a monthly basis, this augurs well for government's revenue collection efforts.

Meanwhile, the Ministry of Energy (Power Division) has also presented a summary on revision of oil marketing companies (OMCs) margins on petroleum products. They currently stand at Rs3.68 per litre.

After a comprehensive discussion, the ECC approved the summary in principle and allowed the agreed revised margin to Rs6 per litre, reflecting an increase of 63.04%; however, its implementation will be subject to fiscal space in petroleum prices.

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