The government on Wednesday cut petrol by Rs7.06 per litre and high-speed diesel by Rs3.71 per litre, in the third consecutive daily reduction under the new pricing system. Petrol now retails at Rs362.00 per litre, down from Rs369.06, and high-speed diesel at Rs387.81, down from Rs391.52, for 5 November only, according to a notification from the Oil and Gas Regulatory Authority.
The fact that the prices apply for 5 November only is a central feature of the new system. Under daily price fixation, the price announced on one day applies to the next day, and a fresh price is set each day based on movements in the international market. Consumers therefore cannot assume that the price they pay today will be the price they pay tomorrow, and the daily announcement has become a regular part of the news cycle.
Wednesday’s cut is the third consecutive daily reduction, which means that prices have fallen on three days in a row. The pattern suggests that international prices have been moving downwards, and that the mechanism is passing those falls through to consumers promptly rather than holding them back. For motorists and businesses that rely on fuel, three days of reductions in succession provide some relief after a period of high prices.
Kerosene oil is Rs323.67 per litre and light diesel oil Rs269.09. Those fuels are used by households and small businesses, particularly in areas without access to natural gas, and their prices are also set under the same notification. The inclusion of kerosene and light diesel oil in the announcement ensures that the full range of petroleum products is covered by the daily pricing system.
The government continues to levy Rs114 per litre in taxes and duties on petrol and Rs100 per litre on diesel. Those levies form a large part of the price paid at the pump, and they remain in place even as the underlying price of fuel falls. The ex-refinery price of petrol fell to Rs266.35 per litre, previously Rs274.41, and the import cost of high-speed diesel decreased to Rs279.88, previously Rs283.59. The fall in the ex-refinery price and in the import cost explains why the retail price has been able to come down, even with taxes and duties unchanged.
Under a new pricing mechanism announced on Monday for 30 days, oil refineries will contribute to the petroleum levy by bearing a cumulative impact of Rs15 billion. The contribution from refineries is part of the arrangement under which the new mechanism operates, and it reflects a sharing of the burden between the government, the refineries and consumers. The 30-day period for the mechanism gives a defined timeframe within which the new approach will be tested.
Petroleum Minister Ali Pervaiz Malik said fuel prices are fixed daily due to fluctuations in international market prices, to boost transparency and pass on the full impact to consumers immediately. The minister’s explanation presents daily pricing as a way of making the process more open and of ensuring that consumers benefit from falls in international prices without delay, just as they would face rises promptly if prices moved upwards. Transparency, in this context, means that the link between international prices and the price at the pump is made visible on a daily basis.
The daily price fixation mechanism was implemented in July, replacing a weekly mechanism introduced in early March. The change from weekly to daily pricing was itself a significant shift, moving Pakistan to a system in which prices respond more quickly to the market. The weekly system, introduced in early March, had already shortened the period between price revisions, but the daily system goes further, aligning the domestic price with international movements on a day-to-day basis.
For consumers, the immediate effect of Wednesday’s announcement is a lower price for petrol and diesel on 5 November. Whether the reductions continue will depend on international prices in the days ahead, and on the operation of the mechanism as it enters its next phase.
Source: Dawn, Business Recorder, Geo.
