After two consecutive hikes in petrol and high-speed diesel (HSD) prices, the federal government has announced new petroleum rates for the upcoming fortnight. The price of petrol has been reduced by Rs7.54 per litre, falling from Rs272.15 to Rs265.61 per litre.

 

However, it merits a mention that the price of HSD has continued to rise, with the government increasing it by Rs1.48 per litre. As a result, HSD now stands at Rs285.83 per litre and will remain in effect until August 15, 2025.

 

Previously, analysts had indicated a possible fall in the prices of both petrol and HSD by Rs6.82 per litre and Rs1.68 per litre, respectively. Similarly, Arif Habib Limited (AHL) believed that persistent increases in fuel prices had created room for the government to reduce the prices of both HSD and petrol.

 

Data from reports suggests that the price of diesel has increased sharply since June 1, rising from a conservative Rs254.64 per litre to a staggering Rs285.83 per litre. This Rs31.19 hike in HSD prices since June 1 translates to a 12.24 percent increase in the rate of the commodity.

 

The hike in HSD prices is likely to raise operating costs for both the transport and agriculture sectors. This increase could have detrimental effects on the economy, as it directly increases food prices. HSD is widely used in agriculture to power tractors and other mechanised farming equipment.

 

An increase in HSD rates could also negatively impact the transport sector, given its reliance on fuel. For instance, the transportation sector has diesel as a primary input and thus requires vast quantities of the commodity. Higher HSD prices imply higher operational costs for businesses in the transportation sector.

 

Moreover, the projected increase in HSD prices is likely to stifle economic activity for businesses that transport goods from factories to stores, as transportation costs will increase, resulting in a drop in profit margins.

 

People relying on private buses and wagons for daily commuting are also likely to be affected, as transport fares are expected to rise to protect vehicle owners’ profit margins. Commuters may face higher fares for an extended period, since analysts point out that fares tend to remain high even after HSD prices decrease following an increase.