Govt is Paying Rs. 118 per Litre Subsidy on Diesel to Keep it Cheaper

The federal government’s latest decision to keep fuel prices unchanged for another week is resulting in a massive burden of Rs. 45 billion on the state treasury. The government is now effectively subsidizing high-speed diesel (HSD) by around Rs. 118 per litre.

According to a latest price breakdown by Oil and Gas Regulatory Authority (OGRA) and industry data, the ex-refinery price of diesel surged sharply from Rs. 330.19 to Rs. 438 per litre between February 16 and March 21, 2026, up by Rs. 118.

However, instead of passing this increase on to consumers, the government adjusted the price differential claim to offset the rate hike. This kept the final consumer price unchanged at Rs. 335.86 per litre.

The unchanged retail price includes fixed components such as petroleum levy (Rs. 55.24), climate support levy (Rs. 2.50), and margins for oil marketing companies and dealers. The widening gap between actual cost and retail price is now being absorbed by the state.

CEO Topline Securities Mohammed Sohail said that such a large subsidy is fiscally “not sustainable” if global oil prices remain elevated and the rupee stays under pressure. Diesel is a critical fuel for transport and agriculture, meaning prolonged subsidies could hurt public finances.

While the policy offers short-term relief to consumers, delaying price adjustments may lead to a much sharper increase in next week’s dreaded fuel price review.

Despite that you earning enough profit from levy and tax, govt does not seems to be in loss.