In a move aimed at providing relief to consumers, the government slashes petrol price by Rs10.2 per litre and high-speed diesel (HSD) by Rs2.33 per litre for the upcoming fortnight. The announcement, made by the finance ministry on Friday, reflects recent trends in the international petroleum market.
Government Slashes Petrol Price Amid International Market Trends
The finance ministry’s notification highlighted that the international petroleum market experienced mixed trends in the last two weeks. As a result, the Oil and Gas Regulatory Authority (OGRA) recalculated consumer prices based on these international price fluctuations. The revised price of petrol now stands at Rs258.16 per litre, while HSD is priced at Rs267.89 per litre.
The Prime Minister’s Office referred to the reduction as a “gift” to the public ahead of the Eidul Azha holiday. This price cut comes after a notable decline in international prices of crude oil, with petrol prices dropping by about $3.75 per barrel and HSD by $2.7 per barrel in the past fortnight; this is in addition to previous declines, making the current reductions particularly significant.
Economic Implications
The international price of petrol has decreased to just over $90 per barrel from approximately $94 per barrel, while HSD has dropped from $98 to $95 per barrel. Despite a slight decrease in the import premium on petrol from $9.7 to $9.5 per barrel, the stability of the rupee has also played a crucial role in maintaining these lower prices.
Additionally, the government has maintained the Petroleum Development Levy (PDL) at the maximum permissible limit of Rs60 per litre for both petrol and HSD, contributing to government revenues. For the current fiscal year, the government aims to collect Rs960 billion from PDL, revised from an earlier target of Rs869 billion. Currently, taxes on petrol and HSD include approximately Rs80 per litre, which encompasses customs duties of around Rs19-20 per litre, although general sales tax on all petroleum products remains at zero.
The reduction in petrol prices is expected to have a positive impact on inflation rates, particularly benefiting the middle- and lower-middle-class consumers who rely heavily on private transport and small vehicles. With monthly sales of petrol and HSD hugely outpacing those of other petroleum products, these price cuts are anticipated to provide economic relief.
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