ISLAMABAD: The government is likely to increase for next 15 days the prices of petroleum products by Rs8-9 per litre after increasing the levy on petrol and diesel.

Informed sources said the Oil and Gas Regulatory Authority (Ogra) had completed its working on the oil pricing based on revised formula under which the government would set prices on a fortnightly basis and in line with prices published in Platt’s Oilgram instead of the existing monthly calculations on the basis of import cost of the Pakistan State Oil (PSO).

The sources said the revised formula was based on increased petroleum levy of Rs30 per litre on both high speed diesel (HSD) and petrol instead of the existing rate of Rs25.73 and Rs27.70 per litre, respectively.

With an addition of some exchange rate fluctuation and new pricing mechanism, Ogra has estimated an increase of about Rs8-9 per litre in the prices of petrol and HSD for the Sept 1-15 period.

The sources said the authorities were still divided over increasing the rate of petroleum levy given the flooding situation in the country, but at least Rs4-5 per litre increase was unavoidable to avoid losses to the oil industry.

Ogra has completed working on revised formula

There was also arguments for de-politicising the petroleum pricing beyond policy decision and letting the price calculations by Ogra to be final prices.

The sources said the matter would be taken up with the prime minister for a decision before a final announcement.

As per calculations, the ex-depot price of HSD is estimated at about Rs115 per litre instead of Rs106.46 at present, showing an increase of Rs8.5 or eight per cent. Also, the ex-depot price of petrol is estimated at about Rs112.50 per litre from its existing rate of Rs103.97, up by Rs8.5 or 8pc.

The government is now charging about Rs42 per litre taxes on petrol and high speed diesel. The government has already increased general sales tax (GST) on all petroleum products to a standard rate of 17pc across the board to generate additional revenues. Until January last year, the government was charging 0.5pc GST on light diesel oil, 2pc on kerosene, 8pc on petrol and 13pc on HSD.

Besides the 17pc GST, the government has almost quadrupled the rate of petroleum levy on HSD and petrol to Rs30 from Rs8 per litre in January last year. The levy on kerosene and light diesel oil remains unchanged at Rs6 and Rs3 per litre, respectively.

The government has been increasing the petroleum levy rates for the past several months, instead of GST as the levy remains in the federal kitty unlike the GST that goes to the divisible pool taxes and thus about 57pc share is grabbed by the provinces.

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

Monthly sales of kerosene and light diesel oil are generally less than 11,000 tonnes and 2,000 tonnes, respectively.

Published in Dawn, August 29th, 2020