ISLAMABAD: The government has collected about 43 per cent higher petroleum levy on oil products during the fiscal year ending on June 30, 2020 as compared to the previous year despite 13pc to 20pc reduction in local production and 25pc drop in import of major products.

The data released by the finance ministry has reported Rs294 billion collection through petroleum levy on oil products during fiscal year 2019-20 when compared to Rs206bn in fiscal year 2018-19.

Also, the government is estimated to have collected almost 31pc higher revenue on key oil and gas products during the year than the previous year despite 13pc and 20pc drop in local production of petrol and high speed diesel (HSD), respectively, and 25pc reduction in import of petroleum products when compared to FY2018-19.

The data released by the finance ministry puts the total revenue collection from seven important oil and gas heads at Rs416bn (July19-June20) compared to Rs319bn of the same period in FY2018, showing about 31pc increase. These heads include Gas Infras­truc­ture Development Cess (GIDC), Gas Development Surcharge (GDS), petroleum levy, discount retained on crude oil, royalties on oil and gas, windfall levy on crude oil and petroleum levy on liquefied natural gas.

In addition, energy ministry officials have reported another Rs360bn collection as General Sales Tax (GST) on oil products compared to Rs220bn of previous year, showing an increase of over 63pc. Another about Rs70bn GST is estimated to have been collected on the sale of natural gas.

Oil and gas sector emerging as single largest contributor to revenue stream

As the total revenue from only these eight items amounted to about Rs850bn in FY2019-20, the oil and gas sector is emerging as the single largest contributor to the revenue stream of the country.

Four major factors are estimated to have contributed to the surge in petroleum revenues, including a substantial increase in various tax rates, removal of legal challenges and higher international prices.

These estimates do not include provincial tax collections through oil and gas and taxes arising out of value addition to oil products, for example, power generation that is almost 70pc dependant on furnace oil, liquefied natural gas and natural gas. Also, the revenue on sale of LNG to consumers is also not part of these estimates.

The finance ministry data, however, suggests that the GIDC collection dropped by almost 56pc to Rs9.5bn during FY2019-20 compared to Rs21.5bn a year before. Conversely, the GDS collection increased by 134pc to Rs12.4bn in FY2019-20 compared to Rs5.3bn in FY2018-19.

The government collected about Rs79bn royalty on oil and gas in last fiscal year, showing a reduction of about 10pc over Rs88bn of FY2018-19. Similarly, discount retained on oil and gas contributed about Rs13bn to the national exchequer when compared to Rs14bn of previous year, down by 7pc.

This was despite the fact that overall petroleum production dropped by 20pc to about 12bn litres when compared to about 15bn litres of previous year, according to the Pakistan Bureau of Statistics (PBS). The bureau has reported that production of two major products — petrol and high speed diesel — dropped by about 13pc and 20pc, respectively — a sign of slower economic activities in the country, partly because of Covid-19.

Also, the PBS has reported about 28pc reduction in oil imports in FY2019-20 in dollar terms and about 16.5pc fall in value of Pakistani rupee. The total oil import bill dropped from $14.4bn in FY2018 to $10.4bn in FY2019.

The import value of petroleum products dropped from $6.3bn in FY2018 to $4.7bn in FY2019, showing a 24.54pc drop. The value of crude imports also fell by 40.4pc to $4.6bn in FY2018-19 compared to $2.7bn of FY2019-20.

The imports of petroleum products during the period increased by about 4pc in terms of quantity while crude oil imports dropped by 24.5pc.

The government had already increased GST on all petroleum products to the standard rate of 17pc across the board to generate additional revenues. Until January last year, the government had been charging 0.5pc GST on LDO, 2pc on kerosene, 8pc on petrol and 13pc on HSD.

Petrol and HSD are two major products that generate most of revenue for the government because of their massive and yet growing consumption in the country. Total HSD sales are touching 700,000 tonnes per month while the monthly consumption of petrol is around 600,000 tonnes.

Published in Dawn, August 15th, 2020