2025 fuel prices: Diesel relief, petrol challenges for businesses

Businesses began 2025 with some good news as the Ministry of Finance announced new fuel prices, revealing that the diesel price hike was lower than earlier predictions. The price of High-Speed Diesel (HSD) now stands at 258.34 rupees per litre after experiencing a price increase of 2.96 rupees.

This is significantly lower than the initial expectation of a 3.62 rupee increase. To grasp the magnitude of the difference, the initial hike in HSD prices was nearly 22.3 percent higher than the one recently just imposed.

However, the price of petrol rose sharply compared to early estimates. Although petrol prices changed by only 56 paisa to settle at 252.66 rupees per litre, the surge in prices was much higher than anticipated.

Businesses that offer petrol allowances for their employees often pay the exact amount to commute to and from work to their residence. It is possible that businesses will have to increase these allowances especially given how news regarding the price hike comes at the start of the year. This is likely to increase costs for businesses while also decreasing profit margins for business owners.

The increases in the price of fuel are also detrimental to the economy as they increase transportation costs, hurting transportation companies the most. Another sector that suffers tremendously due to the spikes in diesel prices is agriculture, which relies on tractors and water pumps that run on diesel.

More worrying than the price hikes themselves is the inaccuracy of the estimates surrounding fuel prices. With the actual petrol price hike being 409 percent larger than the expected one, businesses are beginning to grow worried. While the petrol price hike will impact operations, experts believe that differences between expectations and reality cause businesses to grow weary while making decisions.

These fluctuations show that businesses can’t rely credibly on estimations, adding to the uncertainty in the business environment that already exists. There have been countless instances in the previous year when estimates were wildly off as they predicted prices to rise while they remained unchanged instead.

Even though the price of diesel remains lower at this point compared to January 2024, this remains a great achievement of the current government. It has managed to keep prices relatively stable despite rapid inflation surges that were witnessed in previous periods, such as in May 2023, when inflation reached as high as 38 percent.

According to Express Tribune, however, the premium on oil is $8.69 per barrel, keeping in view the current rate of petroleum levy, general sales tax and currency exchange rate. It could be beneficial for businesses in the coming year if the petroleum levy is revised downwards to help them.