Govt may keep fuel prices locked fortnightly as int'l oil prices decline

June 23, 2022 (MLN): The significant decline in oil prices in the international market will help the government to keep the petroleum prices unchanged during the upcoming fortnight review.

Since the IMF bailout package is crucial amid depleting foreign exchange reserves, the government is on its toes to comply with each condition put forth by the fund to unlock the tranche as soon as possible.

Adding to this, the government has recently agreed with IMF to make notable amendments in the budget for FY23 pertaining to taxation and petroleum levy to shore up the revenues.

However, on the upside, the prices of US crude oil and brent have dropped by 14% and 12% from their all-time high. Thus, if the 10% fall from the ex-refinery price is implied, the price has room to go down by Rs22 per liter.

This would help the government to collect sales tax and petroleum levy without any further increase in petroleum prices. This will also address the issue of skyrocketing inflation to some extent.

To note, the ex-refinery price of petrol stood at Rs220 per litre as of June 15 while the selling price was Rs234 which includes Rs14 as margins of dealers and OMCs.

In order to address the ongoing economic crisis in Pakistan, the IMF is of the view that fiscal consolidation would help the government secure economic stability. Thus, the conditionalities regarding deficit curtailment and unreeling the heavy subsidies must be fulfilled.

On June 15, Finance Minister Miftah Ismail announced that the federal government has decided to raise the prices of petrol and diesel by a further Rs24.03 and Rs59.16 per litre respectively. This was the third consecutive hike in fuel prices since May 26.

After the latest round of hikes, the prices of petrol and diesel now stand at an all-time high of Rs233.89 per litre and Rs263.31 per litre respectively.

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