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Government Announces Significant Increase in Petrol Price by Rs26 and HSD by Rs17, Impacting Business Sector

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The Caretaker Government Increases Petrol and Diesel Prices


The caretaker government on Friday night pushed through another hike in the prices of petrol by Rs26.02 per litre and high-speed diesel (HSD) by Rs17.34 per litre. The increase brings the price of petrol to Rs331.38 per litre while HSD is Rs329.18 per litre, the Ministry of Finance said in a post on X (formerly Twitter) after midnight.

The decision was taken owing to the increasing trend of petroleum prices in the international market. No revision was specified in the rates of kerosene or light diesel oil.

Previous Hikes

The price increase comes on the heels of an already massive hike on Sept 1, when the interim government raised fuel prices by up to Rs18 per litre. That jump in petroleum prices had come after similar hikes by the interim government on Aug 15.

The price hike is based on existing tax rates and import parity prices, mainly because of currency fluctuation and a slight increase in international oil prices.

Hike was expected

Informed sources had told Dawn that the prices of petrol and HSD could go up by about Rs10-14 and Rs14-16 per litre, respectively, on Sept 15 for the next fortnight, while kerosene price would also get costlier by about Rs10 per litre, based on the existing tax rates and import parity price.

The rupee initially depreciated by Rs4.5 against the dollar in the first 10 days of the current fortnight before sliding below Rs300. Meanwhile, benchmark international Brent prices went beyond $92 per barrel on Wednesday against $88 in the first week of September, thus nullifying whatever little space the exchange rate might have created.

On top of this, the government would also pass on to consumers about 88 paise per litre impact of increase in sale margins for petroleum dealers and marketing companies already approved by the Economic Coordination Committee (ECC) of the cabinet last week.

The sources said the import parity price for petrol, diesel, and kerosene had increased by about Rs13, Rs14, and Rs10 per litre, respectively, since Sept 1, but sale prices were estimated to go up by Rs13, Rs16, and over Rs10 per litre as per product imports by Pakistan State Oil. Jet fuels are also estimated to be costlier by Rs10 per litre.

As such, the petrol and diesel prices are estimated to cross Rs320 and Rs325 per litre, respectively. The kerosene rate would be on the higher side of Rs240 per litre.

Impact on Consumers

Most of the transport sector runs on HSD. Its price is considered highly inflationary as it is mostly used in heavy transport vehicles, trains, and agricultural engines like trucks, buses, tractors, tube wells, and threshers, and particularly adds to the prices of vegetables and other eatables.

Petrol, on the other hand, is mostly used in private transport, small vehicles, rickshaws, and two-wheelers and has a direct bearing on the budget of the middle- and lower-middle class.

The increase in prices of petroleum products came on the heels of over 27.4 per cent increase in the August rate of inflation that would also have a lag effect on general prices in the country over the coming days and weeks.

Tax and Revenue

At present, GST is zero on all petroleum products, but the government is charging Rs60 per litre petroleum development levy (PDL) on petrol and Rs50 each on HSD and high octane blending component and 95RON petrol. The government is also charging about Rs18 to Rs22 per litre customs duty on petrol and HSD.

Petrol and HSD are the major revenue spinners with their monthly sales of about 700,000-800,000 tonnes per month compared to just 10,000 tonnes of monthly demand for kerosene.

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