By Riaz Hussain
PESHAWAR — A fresh increase in petrol and high-speed diesel (HSD) prices in Pakistan has once again sparked debate over the heavy taxes and levies imposed on petroleum products.
The Pakistan government has increased the price of petrol by Rs3.05 per litre and HSD by Rs5.37 per litre, citing fluctuations in international oil prices. Following the increase, petrol is being sold at Rs370.80 per litre, while HSD costs Rs398.04 per litre.
The impact of rising fuel prices is also being felt in households. Fifty-year-old Binyamin Khan says he previously kept two GLI cars at home, but rising fuel costs have forced him to keep even his small Mehran car parked. He now relies mainly on a motorcycle for his daily transportation.
He says the cost of living in the city, including house rent, children’s school fees, transportation, healthcare and other household expenses, has risen to the point where he has to think several times before using his car.
“If I pay the house rent, my children’s school fees, doctors’ bills and the cost of medicines, very little money is left for petrol and other daily necessities.”
Binyamin Khan says poor road conditions also mean additional time and fuel costs when taking his children to school. He says the increase in petrol prices affects not only car and motorcycle owners but also the wider population through higher transportation fares and the rising cost of goods.
Debate Over Taxes and Petroleum Levy
The latest fuel price increase has also raised questions about the taxes and levies collected by the government on petroleum products.
According to a report by the Pakistani newspaper Dawn, the government collects around Rs114 in taxes and duties on every litre of petrol, while around Rs100 per litre is charged on diesel.
These charges include the petroleum levy, climate change levy, customs duty and 18 percent general sales tax.
The estimated ex-refinery price of petrol is around Rs253.90 per litre. However, government taxes and levies, freight and transportation costs, marketing margins and other charges push the retail price above Rs370 per litre.
Economist Professor Dr. Manzoor Ali, speaking to Pakistan-Afghanistan Monitor, said Pakistan imports a large portion of its energy from the Middle East, meaning fluctuations in international markets have a direct impact on domestic fuel prices.
He said the government relies more heavily on revenue from energy and petroleum products than from trade and agriculture because it is an easier way to meet revenue targets, but the burden ultimately falls largely on ordinary consumers.
International Oil Prices
Crude oil prices in the international market have remained above $100 a barrel. Continuing tensions in the Middle East and concerns over supply have affected global oil markets, increasing the cost of Pakistan’s petroleum imports.
Despite the latest increase, however, current fuel prices in Pakistan remain below the record levels reached in April this year.
Petroleum Levy: A Major Source of Government Revenue
The petroleum levy has become an important source of government revenue. Official figures show that the government collected around Rs1.507 trillion through the petroleum levy during the last fiscal year, compared with Rs1.220 trillion in the previous fiscal year — an increase of nearly 29 percent.
Critics say that when international oil prices rise, the government could reduce the petroleum levy and other charges to ease the impact on consumers. The government, however, relies on petroleum-related revenues to meet its fiscal targets.
The religious-political party Jamaat-e-Islami, which is currently holding protests across the country, has also called on the government to reduce the petroleum levy on petrol and diesel.
Wider Economic Impact of Higher Fuel Prices
According to the Pakistan Bureau of Statistics, the inflation rate rose to 11.1 percent in August, compared with 9.2 percent in July. Rising food, energy and transportation costs have increased pressure on household budgets.
Petrol is widely used by private vehicles, motorcycles, rickshaws and other small transport vehicles. Diesel prices, however, have a broader impact on the economy because trucks, buses, agricultural machinery, power plants and generators rely heavily on HSD.
Higher diesel prices increase transportation and production costs, which can eventually push up the prices of food and other essential goods.
The latest increase in petrol and diesel prices has therefore renewed a central debate: to what extent should consumers bear the burden of higher international oil prices, and how much should the government reduce taxes and petroleum levies to provide relief to the public?
