In a welcome relief for consumers, Pakistan is set to witness a significant reduction in petrol prices as the rupee continues to appreciate against the US dollar.

Official sources suggested that petrol prices could decrease by as much as Rs 18 per litre, with diesel prices expected to drop by Rs 5 per litre, effective November 1.

The caretaker government had previously lowered the price of petrol by Rs 40 per litre, bringing it to Rs 283.38 paise per litre, and reduced high-speed diesel prices by Rs 15 per litre, setting them at Rs 303.18 paise per litre for the period from October 16 to 31.

Key factors

The main factor contributing to this potential price reduction is the recent strengthening of the Pakistani rupee against the US dollar.

Over the last 15 days, the rupee has appreciated by approximately 3 rupees, coinciding with a global decrease in diesel prices by about $1.3 per barrel and a $3.5 per barrel reduction in petrol prices.

While the government has the opportunity to raise the development levy on diesel from Rs 55 to Rs 60 per litre, the current revenue collection has exceeded targets, mitigating the need for this increase.

The petroleum levy on petrol is already at Rs 60 per litre, contributing significantly to government revenue.

Petrol levy collection

For the current fiscal year, the government has collected around Rs 869 billion in petroleum levy on petroleum products, aligning with budgetary targets and commitments to the International Monetary Fund (IMF). By the end of the first quarter, petroleum levy collection had already surpassed Rs 222 billion, despite the per-litre price of petrol remaining stable at around Rs 50.

Skyrocketing prices of petroleum products and electricity had driven the inflation rate to 31.4 percent in September. The recent increase in gas prices further added to concerns over rising costs.

Sources indicate that, given the current tax rates and other financial factors, petrol prices may decrease by Rs 17-18 per litre as the exchange rate moved from Rs 282 to Rs 279 in just 15 days.

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