ISLAMABAD: The government may increase petroleum prices by up to Rs8 per litre for the next 15 days if it decides not to increase existing tax rates.

Informed sources said the government was still undecided if it should start jacking up petroleum levy with effect from November 1 or 16. Overwhelming consideration is that increase in levy should take place by mid-November to have controlled increase in prices as exchange rate had started coming down.

On the basis of existing tax rates, import parity price and exchange rate, the Oil & Gas Regulatory Authority (Ogra) and Petroleum Division have worked out about Rs6 per litre increase in the price of petrol and that of high speed diesel (HSD) by about Rs8 per litre. The increase for other products, kerosene and light diesel oil was also estimated to be in the same range mainly because of exchange rate loss and higher international oil price over the last 10-12 days of import cargos.

Increase in levy by Rs4 per litre under consideration

An official said the government was considering increasing petroleum levy by Rs4 per litre, either on Sunday or November 16 and would depend on its engagements with the International Monetary Fund for revival of its programme.

Earlier this week, Energy Minister Hammad Azhar had said the government was coming under pressure giving up taxes on petroleum products. The government had set an annual target of Rs610 billion revenue collection through petroleum levy at an average rate of about Rs50bn per month but its cumulative actual collection in first four months had stood at about Rs50bn. The government is currently charging about Rs5.62 per litre petroleum levy on petrol and Rs5.14 per litre on HSD.

In addition, the government is also charging about Rs9.29 per litre and Rs8.81 per litre customs duty on petrol and HSD respectively besides Rs9 and Rs13 per litre GST on these two products.

A final decision about the price increase would be announced by the Ministry of Finance after consultations with the Prime Minister on Sunday.

At present, the ex-depot price of petrol stands at Rs137.79 per litre. The product is mostly used in private transport, small vehicles, rickshaws and two-wheelers and has a direct bearing on the budget of middle- and lower-middle class. The ex-depot price of HSD at present is Rs134.48. Its price is considered highly inflationary as it is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube-wells and threshers.

The ex-depot price of Light Diesel Oil (LDO) is at Rs108.35 per litre at present followed by kerosene’s at Rs110.26 per litre. Kerosene is mostly used by unscrupulous elements for mixing it with petrol and to some extent for lighting in very remote areas. LDO is consumed by flour mills and a couple of power plants.

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. Average petrol sales are touching 750,000 tonnes per month against the monthly consumption of around 800,000 tonnes of HSD. The sales of kerosene oil and LDO are generally less than 11,000 and 2,000 tonnes per month.

Under the revised mechanism, oil prices are revised by the government on a fortnightly basis to pass on international prices published in Platt’s Oilgram instead of previous mechanism of monthly calculations on the basis of import cost of Pakistan State Oil.

Published in Dawn, October 30th, 2021