Why has Pakistan not reduced fuel prices?

It was supposed to be simple. Crude oil prices had fallen in the international market. Therefore, the Pakistan government was expected to reduce local fuel rates. But that didn't happen, and not once but twice.

So, what's up with the Pakistan government and fuel rates?

The government's Finance Division announces fuel rates every fortnight. Two fortnights ago, calculations by oil marketing companies showed that fuel rates could be reduced by up to PKR 6-8 per liter.

But the government increased the petroleum development levy by PKR 10 per liter instead, offsetting any possible reduction due to the decline in global rates. It justified its decision by stating that the amount earned through the PDL — around PKR 6-8 billion — would be used to provide relief in soaring electricity bills.

Then, this fortnight, calculations again showed that there was room for the government to cut prices by up to PKR 9.6 per liter. Expectations regarding a cut were high since the government had already increased the PDL to PKR 70 per liter, the maximum under the Finance Bill for fiscal year 2024-25.

However, the government again refused to cut prices, raising the PDL by PKR 8.02 on petrol and PKR 7.01 on diesel through a Presidential Ordinance. Through the Ordinance, the government omitted "Schedule 5", which would allow it to increase the PDL by any margin.

The reason the government gave was that the added revenue collection would be used to build roads and improve infrastructure in Balochistan.

However, when the government has allocated funds through the Public Sector Development Program, with ministers claiming billions have been set aside for developing infrastructure, and the country has even borrowed from the Asian Development Bank and the World Bank, why does it need to raise money through an increase in the PDL?

An analyst toldNukta that it is because both Sindh and Balochistan governments have failed to provide the international lenders with concrete proposals for loan approvals.

Another analyst was of the view this was a positive step by the government as any cut right now would have minimal impact on inflation. However, if global oil prices go up again, the government would have the option to decrease the PDL and provide relief.