Fuel prices in Pakistan surged to a record high on Aug. 16, as the newly appointed interim government implemented a substantial increase of up to Rs20 per liter, marking the second substantial hike in petrol and diesel prices in just two weeks.
Effective Wednesday, the new petrol rate will stand at Rs290.45 per liter, having climbed by Rs17.50 per liter. High-speed diesel price reached Rs293.40 per liter, following a staggering Rs20 increase.
The Ministry of Finance unveiled the revised prices late into the night, once caretaker Prime Minister Anwaarul Haq Kakar provided his approval. This decision came a day after his swearing-in on Aug. 14.
Attributing the increase to a recent upswing in global petroleum prices, the finance division underscored the need for adjusting domestic rates. The government communication, however, did not indicate any modifications in the costs of kerosene and light diesel oil.
This new surge in fuel costs follows closely after similar adjustments made by the previous government on August 1. Consequently, within just 15 days, fuel prices in Pakistan have soared by nearly Rs40 per liter.
High-speed diesel’s price had peaked at Rs293 per liter earlier in March. Due to its extensive use in heavy transport, trains, and agricultural machinery, this price hike has a considerable impact on transport and food costs.
Likewise, the price of petrol had hit a peak of Rs282 per liter in mid-April, only to subsequently drop to as low as Rs253. This affects private transport, rickshaws, and two-wheelers, placing an additional burden on middle- and lower-middle-class budgets.
Inflation in the country
An increase in petroleum prices is expected to exacerbate inflation, which had subsided in the preceding two months. Data reveals that July’s inflation, as measured by the Consumer Price Index (CPI), was 28.3%, showing a slight decline compared to 29.4% in June and a record 38% in May. Despite this decrease, the inflation rate remains high, particularly considering the high-base effect.
Figures from the finance ministry illustrate that the current petrol price of Rs290.45 per liter is 24% higher than its rate a year ago, which was Rs233.91 in mid-August. Moreover, it is 35% above its lowest point in the past year, which was Rs214.8 in mid-December.
Currently, there is no general sales tax on petroleum products. However, the government imposes a petroleum development levy of Rs55 per liter on petrol and Rs50 per liter on high-speed diesel and high-octane blending components.
Additionally, customs duty of around Rs18-22 per liter is applied to petrol and high-speed diesel.
Petrol and high-speed diesel stand as significant revenue generators for the government, with monthly sales reaching approximately 700,000 to 800,000 tonnes, whereas monthly kerosene demand is a mere 10,000 tonnes.
Kakar Vows to uphold previous government’s policies
Anwaarul Haq Kakar, recently sworn in as interim prime minister, conducted meetings focused on the economy and ongoing developments, pledging to uphold the previous government’s policies. Despite his gradual assumption of the role, assembling a cabinet remained a challenging task. Media speculation floated names for potential caretaker ministers, yet official confirmations were lacking.
Kakar emphasized the continuation of public welfare projects, aiming to enhance health, education, and power sector reforms. He aimed to increase tax revenue, deregulate the economy, and sustain economic policies initiated by the previous government. The enhancement of foreign investment also ranked as a priority. The interim cabinet’s composition remained uncertain