The federal government has cut the price of petrol by Rs8 a litre and high-speed diesel by Rs7 a litre, bringing fresh relief to motorists, transporters and businesses as the new daily fuel pricing mechanism takes hold. The revised rates, announced by the Oil and Gas Regulatory Authority on Tuesday night, take effect from Wednesday 11 November.
Under the notification, petrol falls from Rs346 to Rs338 a litre, while high-speed diesel drops from Rs378 to Rs371 a litre. The new prices apply for one day, under a system in which OGRA now reviews and notifies fuel prices daily, based on international market trends, instead of the previous fortnightly cycle.
The cut is the second in four days. On 7 November, the government had already reduced petrol by Rs6.59 a litre and diesel by Rs4.25 a litre, so the two reductions together have taken Rs14.59 off a litre of petrol and Rs11.25 off a litre of diesel in less than a week. The back-to-back cuts follow a fall in international crude prices and a softening of the war premium that had pushed oil sharply higher earlier in the year.
Despite the relief, fuel remains heavily taxed. According to Dawn, the government continues to levy Rs114 a litre in taxes and duties on petrol and Rs100 a litre on diesel, so more than a third of the pump price of petrol is tax. The petroleum levy has become one of the government's most important revenue sources, and officials have been reluctant to cut it even as prices fall.
Part of the relief is being paid for by the refineries. Under an arrangement announced on 2 November, oil refineries will contribute to the petroleum levy by bearing a cumulative impact of Rs15 billion over 30 days, a burden the government says is part of sharing the cost of relief with the industry rather than passing it all to consumers or the exchequer.
The shift to daily pricing was approved by the federal cabinet on 30 October, amid volatility caused by the war involving Iran and the United States, which had made the old fortnightly cycle too slow to reflect fast-moving international prices. OGRA has also begun publishing daily petroleum prices on its website, in a move the regulator says is meant to improve transparency and let changes in international oil prices reach consumers more quickly.
The cuts also sit inside a wider relief effort. On 17 September, the government rolled out the Prime Minister's Fuel Relief Scheme across the country to ease the burden on the public amid rising fuel prices, and the government and Jamaat-i-Islami held another round of negotiations on Tuesday to find a way forward on further relief in petroleum prices.
For ordinary households, the reduction is welcome but modest. A litre of petrol at Rs338 is still far above the levels of a few years ago, and transport fares, which rose sharply when fuel was dearer, rarely fall as quickly as pump prices. Transporters and goods carriers, whose costs are dominated by diesel, are likely to feel the benefit sooner, and the government will be hoping the cheaper fuel feeds through into lower prices for food and other essentials.
Whether the relief lasts will depend on two things outside Pakistan's control: the price of crude, which has swung wildly with every development in the Middle East war, and the exchange rate, since oil is bought in dollars. Under daily pricing, a rise in either would show up at the pump the next morning, just as quickly as a fall does.
For now, though, motorists filling up on Wednesday will pay less than they did on Tuesday, for the second time in four days. The next notification, due on Wednesday night, will show whether the run of cuts continues or whether the market has already turned.
