Read on if you want to know the answer to “why?”

Oil prices have been falling on the international market for the past few weeks, but the PDM government in Pakistan was refusing to slash them, until yesterday (Thursday) with Finance Minister Ishaq Dar repeatedly saying that the government was keen on upholding its agreement with the IMF.

The agreement required the Pakistan government to charge Rs50 as a Petroleum Development Levy (PDL) on every litre of petrol.

So, after the price was finally reduced yesterday, many people asked if the government had violated the agreement to please the electorate amid the possibility of elections in Punjab and Khyber Pakhtunkhwa where PTI’s Imran Khan plans to dissolve provincial assemblies to force early polls.

How much do you pay in tax on petrol?

With the the Finance Division’s announcement of the new price, the Oil and Gas Regulatory Authority (Ogra) released documents on how the price of petrol is calculated. These documents provide a breakdown of the taxes Pakistanis pay on fuel.

Pakistan imports not only crude oil but also refined petrol products to overcome production challenges at local refineries.

Ogra documents suggest that imported petrol costs Rs119.30 at Pakistani ports. The government levies a 10% import tax on petroleum products. It is then transported to refineries before being sold to oil marketing companies (Byco, Shell etc.)

After the import tax and other transportation charges, a litre of petrol costs Rs149.26, according to Ogra. This is also known as the ‘PSO cost of supply’ or ‘base price’.

Before petrol is sold to you at the pump, a few other costs and taxes are added, including Rs50 in PDL.

Without the PDL and import tax, petrol should cost you around Rs70 per litre less, but it could have cost you more had the government also added the general sales tax, which remains zero.