For the first time in Pakistan's history, diesel prices may exceed Rs. 200 a liter. The key cause is the international market's record-high crude oil prices, as well as the rupee's depreciation versus the US currency.
According to media sources, the federal government would have two options in the second fortnight of this month, beginning April 16, either to raise prices by Rs. 60.54 a liter or to boost the subsidy to maintain the present rate. If the government decides to raise the price, the cost of diesel per liter will rise to Rs. 204.69.
Imran Khan, the former prime minister of Pakistan, announced a Rs. 10 cut in petrol and diesel prices on February 28, as well as a freeze on petroleum goods prices until the next fiscal budget. The Finance Division said on April 1 that the government will bear an additional cost of Rs. 33 billion for the fortnight (1-15 April 2022) in order to maintain existing pricing.
Meanwhile, sources claim that the present government is hesitant to raise prices in order to gain popular support and may not do so. If the government decides to keep the tariffs the same, it will be required to provide an additional Rs. 30 billion in subsidies from April 16 to April 30. As a result, it would bear a Rs. 60 billion cost for maintaining oil prices at current levels.
The government, on the other hand, will have to raise the fuel price by Rs. 24.1 per liter or provide a subsidy to keep the prices stable for the next two weeks. In addition, the government would be required to offer a subsidy of Rs. 38.41 per liter for Kerosene Oil (KO) and Rs. 39.56 per liter for Light Diesel Oil (LDO).
So, it appears that the present administration is in a pickle since it must make a difficult option. To gain public support, it will either raise prices or provide subsidies.