Petroleum prices are expected to decrease for the third consecutive fortnight, with diesel and petrol likely to see reductions of approximately Rs5-18 per liter. This drop is primarily attributed to gains in the exchange rate.
The price of High-Speed Diesel (HSD) may fall by about Rs5-6 per liter, potentially dropping below Rs300 per liter, unless the petroleum levy is further increased by the caretaker government. Petrol is expected to become cheaper by about Rs18 per liter.
This reduction is due to the recent strengthening of the rupee against the dollar and changes in the average prices of diesel and petrol barrels. The government might consider increasing the petroleum levy on HSD to the maximum permissible limit of Rs60 per liter.
The government’s objective is to collect around Rs869 billion in petroleum levy on petroleum products during the current fiscal year. The total petroleum levy collection had exceeded Rs222 billion in the first quarter ending Sept 30, 2023.
The drop in petroleum and electricity prices has contributed to rising inflation, which was recorded at 31.4% in September as measured by the Consumer Price Index. Furthermore, there is an expectation of a significant increase in gas rates approved by the government last week.
These adjustments in petrol and HSD prices may be the third consecutive reductions after three consecutive increases. Between August 15 and September 15, petrol and high-speed diesel prices had increased significantly, reaching historic highs.
However, from October 1 and 16, the rates for petrol and diesel were reduced. Currently, the government levies around Rs80 per liter in tax on petrol and Rs77 per liter on HSD. The government also imposes a petroleum development levy (PDL) of Rs60 per liter on petrol and Rs55 per liter on HSD.
Additionally, it charges custom duties on petrol and HSD. Petrol and HSD are major revenue generators, with monthly sales in significant quantities.
