ISLAMABAD: The government on Monday incr­eased the prices of diesel and petrol by Rs2.31 and Rs1.70 per litre, respectively, for the month of May — almost half of the increase worked out by the Oil and Gas Regulatory Authority (Ogra).

An announcement by the finance ministry said: “The prime minister declined to pass on the full impact of the increase in prices to the consumers and decided that the government will absorb almost 50 per cent of the impact of increase. For this reason, GST on petrol, kerosene and light diesel oil was slightly reduced and that on high speed diesel kept unchanged at 27.5pc.”

The price of high speed diesel (HSD) was increased by 2.31pc, petrol by 1.98pc, kerosene by 4.45pc and light diesel oil (LDO) by 5.43pc. The ex-depot price of HSD was raised by Rs2.31 to Rs98.76 per litre from Rs96.45 and that of petrol by Rs1.70 to Rs87.70 from Rs86. The price of kerosene was increased by Rs3.41 to Rs79.87 per litre from Rs76.46 and that of LDO by Rs3.55 to Rs68.85 from Rs65.30.

Ogra had proposed an increase of Rs5.02 per litre in the price of HSD, Rs3.22 in motor gasoline (petrol), Rs6.97 in kerosene and Rs6.95 in LDO. Interestingly, the regulator had calculated the prices on the basis of higher than notified tax rates for HSD on the order of the finance ministry to enable the government to announce a relatively lower rate for political objectives.

The ministry had ordered calculation of prices on the basis of 31pc GST on HSD and 17pc on all other products. This was despite the fact that the notified-GST rate stood at 27.5pc on HSD, 17pc on kerosene, 16.5pc on LDO and 21.5pc on petrol.

Under the practice in vogue, oil prices are revised on the last day of every month.

Prime Minister Shahid Khaqan Abbasi has been allowing a gradual increase in the prices of LDO and kerosene to bridge a price differential with petrol to minimise mixing of the two products.

Interestingly, kerosene is the only regulated petroleum product but unavailable at the fixed rate anywhere in the country. All other products are deregulated and available reasonably within the price band announced by the government.

Petrol and HSD are two major products that generate most of the revenue for the government because of their massive and yet growing consumption in the country. HSD sales stand at over 800,000 tonnes per month, petrol at 700,000 tonnes and kerosene and LDO at less than 10,000 tonnes.

Published in Dawn, May 1st, 2018