Govt Increases Levy Instead of Passing Oil Price Relief to Consumers

The government has increased the petroleum levy on petrol and high-speed diesel, absorbing the benefit of lower international oil prices and denying consumers the expected reduction in fuel prices.

According to a notification issued by the Petroleum Division, petrol will continue to be sold at Rs. 299.50 per liter, while high speed diesel will remain priced at Rs. 311.47 per liter from June 27 until further orders.

The decision comes despite significant decline in global oil prices following the recent Iran Israel conflict, which had pushed crude prices higher amid fears of supply disruptions.

Pricing calculations shared by Topline Research show that the ex-refinery price of high-speed diesel declined by Rs. 6.57 per liter, falling from Rs. 217.09 to Rs. 210.52 per liter.

However, the government simultaneously increased the petroleum levy by the same amount, from Rs. 72.97 to Rs. 79.54 per liter, fully offsetting the reduction and keeping the retail price unchanged at Rs. 311.47 per liter.

Similarly, the ex-refinery price of petrol eased by 39 paisas per liter, from Rs. 211.37 to Rs. 210.98 per liter. The petroleum levy was raised by an equal amount, from Rs. 66.25 to Rs. 66.64 per liter, neutralizing any potential relief and keeping the pump price unchanged at Rs. 299.50 per liter.

Other components of the pricing structure remained unchanged. The Climate Support Levy stayed at Rs. 2.50 per liter for both fuels, while the Inland Freight Equalization Margin remained at Rs. 2.40 per liter for diesel and Rs. 2.87 per liter for petrol.

Oil marketing companies’ margins were retained at Rs. 7.87 per liter, while dealer margins remained at Rs. 8.64 per liter. No sales tax or Petroleum Development Charge was imposed.

Industry sources said the government opted to retain the fiscal space created by lower international oil prices amid continued revenue pressures and to allow oil marketing companies to adjust inventories purchased at higher costs. Reports also suggest authorities are considering replacing the existing fortnightly fuel pricing mechanism with a monthly review system.

The latest pricing decision means motorists, transporters, farmers, and industries will continue paying existing fuel prices despite easing trends in international oil markets, delaying any pass-through effect on inflation and household budgets.