The petroleum product price relief for the ongoing fortnight felt too little, given how retail prices are almost 50 percent higher from last year – but that is all the room that was available. And no, it is no way a “stunt” by the caretakers to pave the way for a certain foreign Prime Minister planning his return to Pakistan – as some quarters have raised concerns.
After quite a while, both variables fell in place for petroleum prices to be adjusted downwards, without having to forgo revenue. The 3.5 percent appreciation in rupee against the greenback is the biggest fortnightly gain in almost a year. The previous best was in the second fortnight of October 2022, when the former Finance Minister had famously announced his return with a celebration of pegging the dollar back.
International crude oil prices, meanwhile, have behaved, especially in the last few trading sessions – after having threatened to cross $100/bbl. Brent is still seen trading at and around $93/bbl – an uncomfortably high level for dollar-strapped, import-dependent countries such as Pakistan. But it threatened a lot worse, and for Pakistan’s likings, things have not shaped up that way.
All said petrol price at Rs323/ltr remains high enough for the consumption to stay suppressed – as has been the case for over 12 months now. Retail prices have gone up by a staggering Rs70/ltr in the last five fortnights–and around the same for High-Speed Diesel (HSD) – the inflationary consequences of which are far higher than gasoline.
The regulator has also adopted a steady approach of revising the OMC and dealer margins upwards – instead of doing it in a go, which appears a wise move, especially in times of such high volatility. Petroleum Levy on motor gasoline has already been maxed out, whereas that on HSD is inching towards the target set by the IMF. For the first time in many years, the rather tall PL collection target could well be achieved – despite a slowdown in demand.
It is early days but should the crackdown against all kinds of smuggling continue and/or intensifies – this bodes well for revenues at import stage, especially for HSD. It is common knowledge that Pakistan receives HSD from Iranian borders in significant sums, causing hundreds of billions of losses to the exchequer. Implementing border controls and sidelining illegal currency dealers – are good ingredients for a much more stable currency, notwithstanding other issues. And a stable currency solves at least one side of the equation for petroleum pricing.
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