The caretaker government on Friday increased fuel prices to a record high, notifying a Rs. 26/liter hike for petrol tariffs and Rs. 17.34/liter for diesel for the next two weeks.
In a notification, the Finance Division said it was increasing fuel prices “owing to the increasing trend of petroleum prices in the international market.” Following the notified increase, the price of petrol has increased from Rs. 305.36 to Rs. 331.38/liter, while the price of high-speed diesel has gone from Rs. 311.84 to Rs. 329.18/liter. This is the highest price of either petrol or diesel in Pakistan’s history.
Since coming into power last month, the interim government has increased the price of petrol by Rs. 58.43/liter and diesel by Rs. 55.83/liter.
Prior to the announcement, industry experts had said they anticipated a hike in fuel prices, but the extent of the increase has been far in excess of expectations. Earlier, experts had claimed the hike would be in the range of Rs. 10-15/liter, as they had believed that a recent recovery of the rupee against the U.S. dollar would offset some of the impact of rising global oil prices. There are now growing fears of the fuel price hike increasing inflation, especially as diesel is used primarily by the transport sector and often has a knock-on effect on prices of essential commodities.
Earlier this week, the State Bank of Pakistan’s Monetary Policy Committee warned that inflation was expected to rise “significantly” in September, primarily due to fuel costs, but added that it would trend downward October-onwards.
According to Reuters, oil prices hit a 10-month high on Friday, crossing $90/barrel, with expectations of it rising further due to previously announced production cuts by OPEC states. The tariffs are further boosted by the government charging Rs. 60/liter in petroleum development levy on petrol and Rs. 50/liter on diesel.