The prime minister was quick to take credit for the reduction in retail petroleum prices, for the fourth fortnight in a row. Motor gasoline prices are now down to the lowest in 21 months in rupee terms. The international reference price for the RON 92 grade at $74.91/bbl is the lowest in three years. Petrol prices at the pumps have come down by a massive Rs75/ltr from the peak of exactly a year ago. This is the kind of respite masses hit with runaway inflation for the best part of the last 30 months have been looking for.

But should the PM take credit for it? Yes. Credit does not necessarily have to always have a positive connotation. He gets credited for it because it has now been six straight fortnights of the new fiscal year, where the government has resisted the temptation to increase the Petroleum Levy (PL) from the existing Rs60/ltr, which has been in place for over a year now.

In dollar terms, petrol prices in Pakistan were lower way back in May 2022 – nearly two and a half years ago. Petrol at 89 cents per liter is the lowest since the first two weeks in the office for the PDM 1.0 where the infamous subsidy on petroleum via Petroleum Development Claims (PDC) went on longer than many expected. Petrol prices in the last 30 months have averaged exactly $1/ltr, with oil prices, currency and taxes facing significant changes over the course.

At well under a dollar per liter, Pakistan’s retail gasoline price is now among the lowest in the region, for major oil-importing countries. This is critical because Pakistan has set a rather ambitious revenue target from petroleum consumption for FY25 – at a hefty Rs1.29 trillion. This is up 47percent from last year’s collection of Rs869 billion.

With one quarter of FY25 gone, the projected opportunity loss of revenue stands close to Rs45-50 billion assuming sales pattern of 2MFY25 stays on course for September. It is clear as daylight that the government will be in no position to even get close to achieving the PL target by the end of FY25 for two reasons. One, it is already a quarter late in maximizing the PL. And two, sales have stayed 10 percent lower compared to a year ago, which is very odd, given last year’s sales were already at a multiyear low.

This is also counterintuitive, given retail prices have been on a downward trajectory. Look no further than the porous western borders if you are seeking to assign blame. The revenue loss is said to run in hundreds of billions of rupees every year – and leaves as big a fiscal hole as leakages in the oft-discussed electricity and gas sectors.

It can be said with a high degree of certainty that Pakistani authorities will resort to a mini-budget of sorts right before or after the IMF program is inked. The fiscal shortages have already been aplenty with barely a quarter gone by. The center’s Rs50 billion electricity subsidies may well be financed from a PSDP cut, but it will have consequences down the road. Punjab’s rather contentious subsidy of a similar amount will also lead to trouble balancing the budget. So there clearly is a revenue problem, and this is where the authorities’ decision to delay the inevitable makes little to no sense.

Also, this week was the best time to jack up the PL – as it would have been done without having to increase the retail price. On the other hand, taxes on electricity bills continue to be treated in a completely different manner. It is a no-brainer that taxes on electricity bills are much more counterproductive than taxes on petroleum consumption. The world, and most importantly, the IMF views it with a similar lens. The forgone revenue will not be forgotten by the IMF and will come back to bite the masses in some other forms of taxes – and don’t be surprised if they go back to the favored “extra surcharge” on electricity bills. If it is the lack of political capital that is keeping the government from making the right calls, then that is bad news. Because that is not going to increase, anytime sooner, or at all.