The government of Pakistan has finally reached an agreement with the International Monetary Fund (IMF) on the federal budget for 2022-23. The deal was sealed over an online meeting between the IMF staff mission and the Pakistani economic team. In the agreement, the government committed to generate Rs. 436 billion more taxes. Our question is, how will the IMF agreement affect the petrol prices?
Current Fuel Prices
Petrol currently costs Rs.233.89 per litre.
The current Diesel rate is Rs. 263.31 per litre.
Kerosene Oil is at Rs. 211.89 per litre.
And the price of Light Diesel Oil has reached Rs. 207.47 per litre.
Fuel Subsidy
Let’s first get to know what fuel subsidy means. It’s basically a fraction of the price that the government pays on behalf of the public to ease the price burden. Fuel subsidy takes a toll on the national exchequer but provides relief to the consumers.
In the last fuel price hike, the government abolished the fuel subsidy it was offering. That means, as of now, the government is offering zero subsidy on all petroleum products, and the public is purchasing fuel at full prices.
No more fuel subsidy and no more relief for the consumers.
Fuel Taxes
Moving on to the taxes, the government charges two types of taxes on petroleum sales: the Petroleum Levy (PL) and General Sales Tax (GST). Both taxes are currently zero on all petroleum products.
The public has been enjoying zero taxes for quite some time. Former PM Imran reduced sales tax on petroleum sales to an absolute zero in November 2021. Later on, the former government also brought petroleum levy down to zero.
While fuel subsidy will remain zero, fuel taxes will go up. In the IMF agreement, the government has committed to increase petroleum levy by Rs. 50 per litre. The government will impose an Rs. 5 petroleum levy each month and gradually take up to Rs. 50. Long story short, we are in for a series of fuel price hikes.
