Despite a consistent drop in global oil prices, the federal government has opted not to provide full relief to domestic consumers, keeping petrol prices unchanged for another review period. This decision marks the third instance in the past two months where reductions in international oil prices were not passed on to the public.
The current price of petrol remains fixed at Rs252.63 per liter, even though there was ample room to reduce rates. Instead, authorities have chosen to increase the Inland Freight Equalization Margin (IFEM) by Rs1.87 per liter. This adjustment was introduced as a measure to recover losses sustained by the oil industry.
Oil Industry Suffers Due to Finance Bill Loophole
Industry reports indicate that refineries and Oil Marketing Companies (OMCs) have incurred losses totaling Rs34 billion. These losses stem from a tax loophole in the Finance Bill 2024-25, which classified petroleum products as tax-exempt. As a result, companies in the oil sector were unable to reclaim the sales tax they had paid on their inputs, leading to substantial financial setbacks.
However, this increased IFEM is not a permanent burden. The Petroleum Division has proposed that the Rs34 billion in losses could be recovered over the next 12 months. If that timeline holds, the additional charge may be removed within a year.
Diesel Prices Witness Minor Reduction
On the other hand, High-Speed Diesel (HSD) prices have seen a slight reduction of Rs2 per liter, even with the revised IFEM. The new ex-depot price for HSD is Rs254.64 per liter, down from the previous rate of Rs256.64. These prices are expected to stay in place for the next two weeks.
Heavy Government Charges Inflate Fuel Prices
Consumers currently face a significant tax burden on every liter of fuel purchased. The Petroleum Development Levy (PDL) alone amounts to approximately Rs78 per liter for both petrol and diesel. Although there is no General Sales Tax (GST) being applied to petroleum products at present, the government continues to impose a customs duty of Rs17 per liter on both HSD and petrol.
Combined, these taxes and duties enable the government to extract about Rs96 in revenue from each liter of petrol sold. In addition, fuel suppliers and distributors add a markup of Rs17 per liter, further increasing costs for the end consumer.
Govt Reportedly Blocks Rs18/Liter Price Relief
According to various reports, the government has actively blocked a potential Rs18 per liter reduction in fuel prices. This move is allegedly aimed at discouraging excessive fuel consumption while simultaneously boosting state revenue. With monthly sales of approximately 750,000 tons for petrol and diesel combined, the government’s revenue from these products remains a significant contributor to the national exchequer.
