Pakistan cuts diesel price, keeps petrol rate unchanged

The Pakistan government has decreased the prices of petroleum products barring petrol, effective May 16.

According to the Ministry of Finance's notification, the price of diesel has been cut by PKR 2 to PKR 254.64, kerosene oil by PKR 5.04 to PKR 164.65 and light diesel by PKR 4.68 to PKR 150.65 per liter. Meanwhile, the petrol price has been kept unchanged at PKR 252.63 per liter.

The decision was in line with estimates which showed a cut of PKR 1 to PKR 2 per liter.

Prior to the decision, some reports suggested that the government might increase petrol and diesel prices to generate nearly PKR 35 billion additionally. These funds would then be utilized by refineries.

According to official documents, petroleum products — including petrol, diesel, kerosene, and light diesel oil (LDO) — have been classified as “exempt” under the Finance Act 2024–25. As a result, input sales tax has become a cost for refineries and OMCs, totaling an estimated PKR 35 billion for the fiscal year, which cannot be recovered through product prices due to government regulations enforced by the Oil and Gas Regulatory Authority (OGRA).

A draft proposal to levy a 3–5% sales tax on petrol and diesel was developed in consultation with the oil industry, the Ministry of Finance, and the Federal Board of Revenue (FBR). However, it was shelved due to the absence of an agreement with the International Monetary Fund (IMF) on allowing reduced GST rates for these products.