ISLAMABAD: The government on Monday increased prices of High Speed Diesel (HSD) and Liquefied Petroleum Gas (LPG) by 3.94pc and 1.48pc, respectively, with immediate effect.

However, by reducing some taxes it kept prices of petrol, kerosene oil and light diesel oil unchanged for the next 15 days, according to an announcement made by the ministry of finance.

As such, the ex-depot price of HSD was fixed at Rs105.43 per litre with an increase of Rs4 (3.94pc) from existing Rs101.43 per litre. The HSD is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube-wells and threshers etc.

The ex-depot prices of petrol remain unchanged at Rs100.69 per litre, kerosene oil at Rs65.29 and Light Diesel Oil (LDO) at Rs62.86 per litre. Petrol is mostly used in private transport, small vehicles and two-wheelers and LDO is consumed by flour mills and a couple of power plants.

The LPG price has also been increased by Rs1.93 per kg to Rs131.61 from the earlier price of Rs129.68 per kg in November. The new LPG prices would remain in place for the month of December. Last month, LPG prices were increased by Rs9.66 per kg to Rs129.7 per kg from the October price of Rs120 per kg. LPG prices have been continuously going up since April 2020 when its price stood at Rs90.50 per kg.

In revising the prices of petroleum products, the government did not pass on the full impact of international prices as it reduced Petroleum Levy (PL) on all products. It reduced PL on petrol by about Rs1.32 per litre to Rs28.68 and about Rs2.43per litre on HSD to Rs27.57 from a flat rate of Rs30 per litre on both products. Had the government kept the tax rates unchanged, the petrol rate should have gone up by at least Rs1.32 per litre and diesel should have become costlier by Rs6.45per litre.

Likewise, the PL on kerosene was reduced from existing Rs10.78 per litre to Rs6.10, down by Rs4.68 per litre (over 43pc). Similarly, the levy on light diesel oil was also completely removed from the existing rate of Rs6.52 per litre in November.

The finance ministry’s statement claimed the government “decided to absorb most of the increase in international prices of petroleum products” to provide maximum relief to the people.

The government is currently charging a standard rate of 17pc general sales tax (GST) across the board to generate additional revenues while petroleum levy is slightly lower than maximum permissible limit. Until January last year, the government was charging 0.5pc GST on LDO, 2pc on kerosene, 8pc on petrol and 13pc on HSD.

As such, the government is now charging a total of about Rs47 per litre tax on petrol and about Rs52per litre on HSD.

Over the last many months, the government has been increasing PL rates instead of GST as levy remains in the federal kitty while GST goes to the divisible pool taxes and thus about 57pc cent share is grabbed by provinces.

The petrol and HSD are two major products that generate most of the revenue for the government because of their massive and growing consumption in the country. Average petrol sales are touching 700,000 tonnes per month against the monthly consumption of around 600,000 tonnes of HSD. The sales of kerosene oil and LDO are generally less than 11,000 and 2,000 tonnes per month.

Published in Dawn, December 1st, 2020