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Cheaper petrol for lower income group
Petrol Price in Pakistan

Cheaper petrol for the Lower Income Group

According to report published in The Express Tribune, the government is considering to provide some kind of subsidy for the motorcycle users in Pakistan, especially who fall in the low-income group.

About 30 million motorcycle users in Pakistan consuming some 40-50% of the total gasoline consumed in the country. So, they can be given the benefit of such subsidy.

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How is it possible?

First Approach – To transfer the subsidy amount through the PTI Government Ehsaas programme. But, through Ehsaas program it may be rather difficult to provide subsidy for 30 million users through motorcycle registrations.

Their proposal is to provide subsidy by providing a separate brand of gasoline under a low-octane system.

This time, RON-95 and higher octane are available in Pakistan. This shift has been done recently. Previously, up to year 2020, it was RON-92, and up to year 2017, it was RON-87.

Higher octane (RON) fuels are required by new and modern vehicles having the electronic ignition system. On the other side, older vehicles and motorcycles having the carburetor system can use gasoline at lower octane levels.

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Their proposal is to launch a low octane fuel of RON-87 for the poor motorcycle and old car users.

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It would be easy and economical to market such a fuel product. currently, refineries are producing RON-87 gasoline as a standard product.

A Rs10-20 per litre economical petrol product can be provided for motorcycles. Additives cost of Rs5 per litre or more can be avoided – and also reduced taxation in the form of no or lesser petroleum levy and possibly reduced General Sales Tax (GST).

The deemed duty of 7.5% on diesel can also be shifted to the conventional gasoline of RON-95 and upwards, creating space for the proposed low octane gasoline.

“Lower octane grades, with octane number lower than RON-90 or AKI 85, are still available for use in motorcycles, very old vehicles or off-road applications such as fishing boats, agricultural machinery or small spark-ignition engines of non-road mobile machinery (NRMM). They are continued to be used primarily in the developing regions of Africa, Latin America, Russia & CIS and parts of Asia-Pacific and the Middle East. For example, in Indonesia, RON-88 is used primarily by motorcycles. Low octane gasoline grades fully dominate the gasoline pools of Bolivia and Yemen, while they account for the majority of gasoline pools in Colombia, Ecuador, Egypt, Iran and Indonesia.”

As for the upper income group, there is a scope for higher taxation and pricing, considering the difference between gasoline prices in India and Pakistan – India PKR 243 per litre, Pakistan PKR 150.

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However, so long as the Ukraine conflict and other linked international issues continue, there is very little any government in the world can do anything about petroleum prices, except for controlling it’s consumption.

Study Published in The Express Tribune, March 14th, 2022.

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