ISLAMABAD: The government is expected to gradually increase petroleum levy on petrol and other petroleum products to improve revenue collection as targeted under the 2021-22 federal budget and IMF programme.

The move would help widen a gap between compressed natural gas (CNG) and petrol prices and may contain import bill. The government had set a Rs610bn target of petroleum levy during the current fiscal year but could actually collect no more than Rs25bn in first two and half months of the first quarter, an official said.

The Ministry of Finance in a statement said that a delegation of All Pakistan CNG Association had a meeting with Finance Minister Shaukat Tarin to explain the challenges being faced by the CNG sector, at present, due to massive fluctuations in the international prices of LNG along with rupee depreciation. This has made CNG relatively expensive as compared to petrol in the domestic markets.

“The surging prices of CNG have undermined its attraction as a fuel of choice for the local consumers,” the finance ministry quoted All Pakistan CNG Association (APCNGA) Chairman Khalid Latif who also presented a comparative analysis between retail prices of CNG and petrol.

It was explained that CNG was launched in Pakistan as an environment friendly and alternate fuel with a primary objective to curtail costly import of petrol. Overall investment in the CNG sector is around Rs450 billion over last 15 years, the finance ministry said.

Mr Tarin told the CNG sector delegation that the Covid-19 pandemic affected the international prices of petroleum products including LNG due to supply side disruptions. He said the government has sustained the pressure and provided maximum relief to the consumers by keeping petroleum levy at the minimum. He reiterated the resolve to help CNG users affordable prices for their fuel.

The sources said the CNG delegation explained to the finance minister with facts that oil import could be contained by about $700 million this year because of 51pc cheaper import of LNG when compared with petrol at import stage. The delegation also offered the government that the CNG sector was willing to pay a fix price throughout a year that would balance peak LNG import price with low prices.

The delegation also demanded reduction in sales tax and customs duties on import of LNG by the CNG sector because it was the only sector that was paying the full import price along with taxes while all other sectors were paying subsidized gas and LNG rates.

The finance minister constituted a committee comprising chairmen FBR and Ogra, representatives of Petroleum Division and All Pakistan CNG Association to workout options for optimal solution.

APCNGA leader Ghiyas Paracha said increased import of gas will help the government save $350 to $700 million in two years. A statement said Mr Paracha briefed the finance minister about the problems and suggested long-term and short-term solutions including freezing prices of RLNG for the CNG stations on the level of August-March and a 12pc increase in sales tax should be reversed.

Published in Dawn, September 28th, 2021