KARACHI, March 10: The government’s kitty eats up Rs13 per litre on petrol in the shape of customs/excise duty and petroleum development levy (PDL) and 15 per cent general sales tax, out of Rs43.96 per litre ex-depot sale price of petrol.
Similarly, in diesel, the exchequer collects Rs4.25 per litre under the head of 15 GST and PDL, out of Rs29.21 per litre rate of diesel. There is no customs/excise duty on diesel.
The Rs13 on petrol and Rs4.25 per litre on diesel, which goes to the national treasure under various heads, may go up in case the government raises the PDL.
Keeping in view the same prices of petrol and diesel, the landed or ex-refinery price ranges between Rs21.77 and Rs22.39 per litre, while Rs1.53 and Rs1.75 account for OMCs distribution margin (3.5 per cent) and dealers’ commission (four per cent), respectively.
The inland freight equalization margin on petrol is Rs5.41 and 0.39 paisa on diesel in order keep one price of POL products all over the country.
This chemistry of calculating the ex-depot sale price of petrol and diesel was described by a senior official of the Oil Companies Advisory Committee (OCAC) in a briefing titled “oil pricing in Pakistan” to reporters here on Thursday.
OCAC secretary-general Abid Saeed Ibrahim fully tried to defend the domestic price hike in POL products by putting eight main reasons behind the rising annual global oil demand (84 million barrels per day), which is rising by two per cent per annum — economic recovery in the US, high economic growth in China and India, production capacity constraints, anxiety on shortage, seasonality, severe winter exacerbates demand, production control by oil producing countries, US refineries operating at 97 per cent capacity and geo-political situation, fear premium in price.
He claimed that POL prices in Pakistan were still cheaper by 15-30 per cent than India where petrol and diesel are sold at Rs51.87 and Rs36.02 in Delhi, Rs56.05 and Rs39.37 in Kolkata, Rs56.54 and Rs40.16 in Chennai, and Rs59.26 and Rs45 in Mumbai.
However, he did not give any details regarding the rates of taxes and duties, OMCs and dealers’ margins, exchange rate parity and ex-refinery prices that make petrol and diesel costlier in India. But, he made it clear that there was no plan to make the local POL prices on a par with India.
With only four days ahead of the next fortnightly review, it appears that the main aim of the OCAC in holding the press conference is to caution the general public to be prepared for future blows.
The OCAC secretary declined to comment on future POL price outlook and chances of decreases or increase in the March 15 meeting of the OCAC.
Some refinery officials at the sidelines of the press briefing said crude oil prices were expected to fly high in the world markets unless demands from world’s top economies — the US, China and India -– slow down.
Mr Ibrahim said that in case the US attacks Iran in future, the crude oil prices were expected to swell to $80 a barrel and one could estimate its impact on local prices. Besides, he says a fear also looms large that in case demand of oil products rises, there is no additional capacity available in the oil producing countries, except Saudi Arabia, which has 1.5 million barrel per day additional capacity.
Prime Minister Shaukat Aziz in an interview to an electronic media on Wednesday also defended the local price hike by claiming that POL prices are still cheaper in Pakistan by 15-25 per cent than neighbouring countries.
Market analysts said the government as well as the OCAC were actually giving a note of caution to the end-users to manage extra money for buying essential items as long as international prices continued to show rising trend.
They said that rising trend in domestic oil prices could only be contained if the government reduced its taxes, especially GST, or OMCs/dealers reduce their margins for the time being in order to give some benefits to the general public.
On many occasions, the successive governments had frozen the POL prices on political grounds in order to win support of the masses, but later increased them phenomenally to recover the losses incurred to the exchequer.
Transporters have been clamouring for wheel-jam strikes against the POL price hike, besides demanding raises in transport fares.
Abid Ibrahim said that Light Arab Crude price had surged by 45 per cent from January 1, 2004 ($30 a barrel) to $43.54 a barrel (March 1, 2004). Similarly, diesel price in the world markets was $35 a barrel in January 2004, which has risen to $50 a barrel in March 2005.
At a time oil price freeze (May 15-December 15, 2004), the diesel price in the world markets rose by 22 per cent. After de-freezing of domestic price from December 31, 2004, the diesel price was enhanced by only 6.5 per cent. During May 15-December 15, 2004, the government took a hit on itself by bringing the PDL to zero. Now it has started recovering to reach near the 2004-2005 target of Rs47 billion.
From July 1, 2004 (when the OCAC was assigned the task of regulating the POL prices) to February 28, 2005, the prices of POL products had been adjusted 89 times. During this period, petrol prices had been increased by 41 times as against decline by 23 times, while the prices remained unchanged on 25 times. Similarly, the diesel prices had been revised upward by 38 times as against drop by 23 times, while they remained unchanged on 28 times.
The Middle East Arab Gulf price of diesel, which was $37.55 a barrel in May 2004, rose to $59.48 per barrel on March 8, 2004, showing a rise of 35 per cent. Oil prices in the global markets moved up by 35 per cent, while local price of diesel increased by 16 per cent.
Mr Ibrahim said that petrol and diesel prices in Pakistan should have been higher to Rs46.06 and Rs32.92 a litre as compared to the current price of Rs43.96 and Rs28.21 per litre, respectively, if the government and the industry would have not financed over Rs40 to protect the consumers from the increase in oil prices, especially during the May 2004-December 2004 period when the government had frozen the POL price.
He, however, declined to comment when asked that how the profits of OMCs rose sharply when there was a price freeze during that period.
