In a much-needed relief for consumers, petrol price is projected to decline by as much as Rs. 15 per litre for the upcoming fortnight, ending March 31. This anticipated reduction is primarily attributed to fluctuations in global oil prices and adjustments in import premiums.
However, the relief hinges on the government maintaining existing tax rates, a factor that remains uncertain amid financial maneuvering.
While the drop in petrol price is a positive development, there are speculations that the government may use this opportunity to increase the petroleum levy or introduce a carbon tax. This move could be instrumental in securing an additional $1 billion financing from the International Monetary Fund (IMF) to support climate adaptation initiatives. Consequently, the extent of the price cut will ultimately depend on final calculations on March 15.
Expected Reductions in Petrol Price
Based on preliminary estimates, petrol price is likely to decrease by up to Rs. 15 per litre, while high-speed diesel (HSD) could see a reduction of Rs. 8 per litre. Kerosene and light diesel may witness price cuts of Rs. 10 and Rs. 7 per litre, respectively. The downward trend follows a decrease of approximately $3 per barrel in Brent crude prices over the last 10 days.
Tax Burden & Pricing Structure
Despite the zero-rated General Sales Tax (GST), the government levies around Rs. 76 per litre in taxes on petrol and diesel, including a petroleum development levy (PDL) of Rs. 60 per litre. This amount can legally be raised to Rs. 70 per litre. Additionally, a customs duty of Rs. 16 per litre is imposed, alongside Rs. 17 per litre in distribution and dealer margins.
As consumers anticipate a drop in fuel costs, the government’s decision on taxation will ultimately determine whether this relief reaches the public or is absorbed to meet fiscal objectives.
