Higher Levy Reverses Latest Petrol Relief in Pakistan

Pakistani consumers have once again missed out on a larger reduction in fuel prices after the federal government increased the overall levy burden on petrol, offsetting much of the benefit from lower international oil prices.

While the government reduced the prices of both petrol and high-speed diesel by Rs. 1.97 per litre for the week beginning July 4, changes to the tax structure absorbed a significant portion of the decline in global fuel costs.

According to data compiled by Topline Securities based on OGRA pricing, the ex-refinery price of petrol fell by Rs. 12.18 per litre during the week. However, the benefit was largely offset by a Rs. 3.99 per litre increase in the Inland Freight Equalization Margin (IFEM) and a Rs. 6.22 per litre increase in the government’s total levy burden, resulting in a net reduction of just Rs. 1.97 per litre at the pump.

The overall tax on petrol increased from Rs. 69.14 to Rs. 75.36 per litre. This consisted of a Rs. 3.72 per litre increase in the Petroleum Levy, which rose from Rs. 66.64 to Rs. 70.36, and a Rs. 2.50 per litre increase in the Climate Support Levy, which was raised from Rs. 2.50 to Rs. 5.00 per litre.

For high-speed diesel, the government reduced the overall levy burden by Rs. 6.22 per litre. Although the Climate Support Levy was also increased by Rs. 2.50 per litre, the Petroleum Levy was cut by Rs. 8.72 per litre, from Rs. 79.54 to Rs. 70.82, bringing the total levy down from Rs. 82.04 to Rs. 75.82 per litre.

Diesel’s ex-refinery price, meanwhile, increased by Rs. 4.25 per litre during the week. The reduction in the overall levy helped offset this increase, allowing the retail diesel price to also decline by Rs. 1.97 per litre.

Following the latest revision, petrol is priced at Rs. 297.53 per litre, while high-speed diesel now costs Rs. 309.50 per litre. The revised prices took effect on July 4.