Petrol prices likely to increase in Pakistan

ISLAMABAD: Prices of petrol, high-speed diesel (HSD), kerosene, and light diesel oil (LDO) are likely to increase, according to sources. This situation may arise after the International Monetary Fund (IMF) demanded that Pakistan impose an 18 percent sales tax on petroleum products, which would result in prices increasing by up to Rs 50 per liter.

According to media reports, the IMF has rejected Pakistan’s proposal to impose a 1 to 2 percent sales tax on petroleum products and has expressed its desire to charge a higher rate of 18 percent.

The government has refrained from implementing the IMF’s demand, at least for now. However, the IMF’s stance has jeopardized the $5-6 billion upgrade projects under the Brownfield Refinery Policy 2023.

Local refineries have lamented that the proposed change to zero-rated exemption for sales tax on petroleum products has already increased operational and project costs, resulting in the cancellation of a $1.65 billion concessional package under the ESCROW account.

The IMF has also proposed a 15 percent sales tax on food items, but the federal government has not yet paid much attention to the issue.

On the other hand, the government is considering reducing the petroleum levy from Rs 45 per liter to Rs 60, while there is also talk of imposing a sales tax equivalent to 18 percent. The IMF did not object to this adjustment when provided.