The Pakistani government is considering a new tax on petroleum products, which could lead to a delay in expected price cuts. The proposal, under review by the Petroleum Division, suggests an additional 4.12 rupees per liter in costs, which may cancel out potential relief for consumers due to lower international oil prices. The price adjustment, initially expected for the next two weeks, is now uncertain.
The government’s proposed tax would generate an estimated 75 billion rupees annually. This includes a 3 to 5 rupee per liter General Sales Tax (GST) to be implemented starting July 2025. Without this new taxation, the prices of petrol and diesel were expected to decrease by approximately 3.5 and 7 rupees per liter, respectively. These reductions would have been the result of softening international market prices.
However, over the past two months, the government has managed to prevent a potential 18-rupee reduction in fuel prices. This was done by raising the petroleum levy, which aims to fund electricity subsidies and infrastructure projects in the southwestern provinces. Experts have raised concerns that this move could make petroleum products even less affordable for the average consumer.
The Petroleum Division has also proposed increasing the margins for oil marketing companies (OMCs) and petroleum dealers. The suggested 1.13 to 1.40 rupee per liter increase would ensure profitability for the companies, though it would further inflate prices for consumers. The proposal is being scrutinized by the Oil and Gas Regulatory Authority (OGRA) and other regulatory bodies.
The move to introduce a sales tax on petroleum products is part of a broader attempt to stabilize Pakistan’s fiscal situation. While the government aims to stabilize the oil supply chain, critics argue that these measures will continue to burden consumers already facing high inflation. With continued negotiations, the final decision on these changes is still pending.