ISLAMABAD: The prices of oil products may stage highest increase of the year if the government accepts calculations made by Oil & Gas Regulatory Authority (Ogra) on the basis of artificially higher tax rates.

In a summary move to the government, Ogra recommended Rs12.50 and Rs8.37 per litre increase in the prices of high speed diesel and petrol, respectively.

The government is, however, unlikely to pass on the full impact worked out by the regulator in view of this being the last price adjustment of its tenure. An official said the government may absorb the increase in tax rates to keep the prices unchanged as a departing gift to consumers.

Interestingly, prices for the next month have been worked out on the basis of higher-than-notified tax rates for high speed diesel (HSD) on the orders of the Ministry of Finance to enable the government to announce a relatively lower rate for political objectives.

In an order, the finance ministry has ordered calculation of prices on the basis of 31 per cent GST on HSD and 17pc on all the other products. This is despite the fact that notified-GST rate on HSD at present was 27.5pc.

In addition, the government is also charging Rs8 per litre petroleum levy on HSD, Rs10 per litre on petrol and Rs6 and Rs3 per litre on kerosene and light diesel oil (LDO) respectively.

Based on existing tax rates and import prices reported by Pakistan State Oil (PSO), Ogra has worked out an increase of Rs12.50 per litre in the price of HSD and Rs8.35 per litre in motor gasoline (petrol) for June. The regulator also recommended Rs8.23 and Rs11.65 per litre increase in the prices of kerosene and LDO respectively.

As such, if the regulators’ calculations are approved by the prime minister, the price of HSD would go up by 12.7pc, petrol by 9.5pc, kerosene by 10.3pc and LDO by 16.9pc. The Ogra said the adjustment in prices of petroleum products was required to pass on the impact of fluctuation in international oil prices and currency fluctuation.

Therefore, on the basis of existing tax rates and imported cost of PSO, Ogra calculated the new ex-depot price of HSD at Rs111.26 per litre instead of the existing rate of Rs98.76 per litre. This is the highest HSD rate since October 2014.

For petrol, the ex-depot price was worked out at Rs96.37 per litre instead of the current rate of Rs87.70 per litre — highest since November 2014.

Likewise, Ogra calculated ex-depot price of kerosene at Rs88.10 per litre – highest since July 2015 – against the existing rate of Rs79.87 per litre, showing an increase of Rs8.23 per litre or 10.3pc. Also, it proposed Rs11.65 per litre increase in the price of LDO to Rs80.50 instead of current Rs68.85, up 16.9 pc.

Under the practice in vogue, oil prices are revised on the last day of every month. The petrol and HSD are two major products that generate most of the revenue for government because of their massive and yet growing consumption in the country. HSD sales across the country are now going beyond 800,000 tonnes per month against monthly consumption of around 700,000 tonnes of petrol. The sales of kerosene oil and LDO are generally less than 10,000 tonnes per month.

Published in Dawn, May 31st, 2018