ISLAMABAD: Prime Minister Shehbaz Sharif announced a Rs10 per litre increase in the petroleum levy on Saturday, marking a 17% rise to Rs70 per litre. Despite this hike, the prices of petrol and diesel will remain unchanged, with petrol priced at Rs255.63 per litre and high-speed diesel at Rs258.64 per litre. This decision allows the government to redirect the additional fiscal space towards reducing electricity prices by approximately Rs1.50 per unit.
This strategy comes as a response to the continued financial burden on consumers due to high electricity tariffs. Although global oil prices dropped in mid-March, the government decided not to pass these savings onto consumers. Instead, the savings will help reduce electricity costs, with further details of the reduction to be revealed on March 23.
According to finance ministry officials, the government’s decision is part of a broader effort to reduce electricity prices for consumers. Residential electricity prices, which have been burdensome for households, are primarily inflated due to inefficiencies, cross-subsidies, and idle capacity payments. The government aims to address these issues, with Power Minister Sardar Awais Leghari tasked with formulating a plan to lower electricity rates by Rs6 to Rs7 per unit.
Federal Minister for Petroleum, Ali Pervaiz Malik, explained that while petrol prices in Pakistan are among the lowest in the region, electricity costs remain the highest, prompting the government’s efforts to balance the two. The government expects to generate about Rs180 billion annually from the increased petroleum levy, which will help fund the electricity relief.
Despite Pakistan’s relatively low petrol prices compared to neighboring countries like India and Sri Lanka, the government’s move aims to provide relief to middle and lower-income groups, who are most affected by rising fuel and electricity costs.
The government’s commitment to public welfare is reflected in this trade-off between petrol and electricity costs. While the petroleum levy has been raised to absorb the price reduction, officials hope to alleviate the financial pressure on households through lower electricity bills.
In addition to this, the government had hoped the IMF would approve a reduction in the GST rate on electricity bills, but the IMF rejected this proposal. Nonetheless, the government remains focused on using the fiscal space created by global oil price fluctuations to ease the financial strain on the public.
As part of this decision, the government has kept fuel prices stable through the end of March, with the following rates maintained: petrol at Rs255.63, high-speed diesel at Rs258.64, kerosene oil at Rs168.13, and light diesel oil at Rs153.34.
While the petroleum industry had recommended a price cut of up to Rs14.16 per litre based on the global price reduction, the government chose not to pass this benefit to consumers, opting instead to use the additional levy to subsidize electricity prices.
