October 1, 2007	Monday	Ramazan 18, 1428

ISLAMABAD, Sept 30: In a major reshuffle in rates of taxes and other charges, the government on Sunday increased transportation cost of petrol by 34-40 per cent and slashed petroleum development levy by 21-27 per cent to keep petroleum prices unchanged despite price hike in the international market.

The rates were changed despite the fact that ex-refinery prices or import parity prices of kerosene have dropped by 6.6 per cent or about Rs2 per litre and that of diesel by 0.72 per litre (about 3 per cent). The ex-factory price of motor spirit (petrol) and HOBC has, however, increased by Rs1.60 per litre or about 5 per cent.

Already under criticism for uncontrolled hike in wheat and flour prices and some other kitchen items in an election season, the prime minister rejected on political considerations a summary moved by the secretary for petroleum and natural resources which sought an increase in diesel prices by about Rs2.50 per litre, to pass on to consumers the impact of price hike in the international market, informed sources told Dawn.

As a result, the government revenue in the form of petroleum development surcharge will reduce by move than Rs3 billion when compared with the previous fortnight but this will partly salvage declining profits of oil marketing companies to the extent of about Rs700 million in the same period. The sources said the cap on diesel and kerosene prices had forced the government to provide about Rs9 per litre subsidy which it recovered through petroleum development surcharge on petrol and higher IFEM on petroleum products. However, the government revenue on these two items in the form of GST remained unaffected at Rs4.60 and Rs4.25 per litre.

Not only OMC’s take in the form of inland freight equalisation margin (IFEM) has been upped by 34-40 per cent, but their profit margin has also improved by 5.69 per cent on petrol and 8.3 per cent on HOBC. Sources in the Oil and Gas Regulatory Authority which notified the revised prices said it was yet unclear how the IFEM rates had been increased significantly in just 15 days and would need to be investigated and examined on the basis of actual accounts. Dealers would also get about 6.4 per cent and 7.95 per cent increase in their commission due to rise in international oil prices.

The government would, however, continue earning Rs6.63 per litre and Rs12.50 per litre on petrol and HOBC (high octane blending component) in addition to 15 per cent general sales tax on petroleum products at the rate of Rs7, Rs8.46, Rs4.60 and Rs4.25 per litre on motor spirit, HOBC, kerosene oil and diesel, respectively. Last year, the sources said, the government earned over 64 billion in GST collection on petroleum products in addition to over Rs27 billion in PDL.

They sources said the secretary for petroleum and natural resources had asked the Ministry of Finance about a fortnight ago to release about Rs9 billion to oil marketing companies and refineries on account of price differential claims but the request was not entertained. As a result, OMCs’ outstanding price differential claims have gone up to about Rs25 billion.

According to a notification issued by Ogra, the sale prices of petroleum products would remain unchanged for the next fortnight. The petroleum prices are fixed on the basis of average Arab-Gulf prices for the previous fortnight for Naphtha, diesel, kerosene and furnace oil to which IMEM is added, reflecting estimated transportation cost of products to 29 designated depots across the country. Besides, government taxes like excise duty, petroleum development levy and sales tax are added to arrive at the notified sale prices.