Surcharge on petrol, diesel under consideration

Published December 30, 2014
A Pakistani employee fills the tank of a car at a fuel station.—AFP/File
A Pakistani employee fills the tank of a car at a fuel station.—AFP/File

ISLAMABAD: With crude price falling below $57 a barrel in the Middle East, the government is considering imposing a special surcharge on some petroleum products to partially offset a shortfall in revenue of the Federal Board of Revenue (FBR).

Informed sources said on Monday that the new surcharge would be imposed on petrol and high speed diesel.

They said Finance Minister Ishaq Dar had held a series of meetings with the ministries of finance and petroleum, Oil and Gas Regulatory Authority (Ogra) and FBR to find ways of retaining some of the reduction in oil prices instead of passing on full benefit to consumers.

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According to calculations worked out by Ogra for next month, the price of petrol is estimated to fall by Rs6.56 per litre, high speed diesel by Rs9.91, HOBC by Rs17.61, kerosene by Rs13.23 and light diesel by Rs12.56 per litre.

The sources said Ogra had been asked to withhold its pricing summary and forward it to the government on Wednesday (Dec 31) and wait for a decision on the special surcharge.

A senior official said the government had very limited options available with it and, therefore, required a special legal instrument to block some of the benefits reaching consumers. He said the government was already charging full petroleum levy on all petroleum products, along with 17 per cent general sales tax.

Although the GST and petroleum levy are approved by parliament through finance bills, the government always has the ‘sovereign right’ to impose a fresh surcharge or levy through an ordinance or a statutory regulatory order (SRO).

“Yes, we are examining all possibilities but a solution has not yet been found. We have two more days to find a solution to retain some revenue and, if not possible now, we will find a legal way out next month,” the official said.

The finance minister has made an implied confirmation that the government had no intention to pass on the full impact of oil price reduction to consumers.

“But it does not mean that we will overcharge consumers. Providing benefit to people is our first priority, but along with consumers, we are only trying to partially recoup revenue losses,” he said.

“We will not disappoint people and will also be successful in finding a little fiscal comfort for the federal government and this finance will also be used in the best possible interest of the public,” Mr Dar added.

The sources said the monthly impact of reduction in oil prices was Rs1-3 billion, but the real cause of concern was the government’s loss on account of windfall revenue loss on crude, which normally yielded Rs30-35bn every year as a result of higher international price.

Under a production agreement with exploration companies, crude oil price beyond $60 in the international market is shared between the government and the companies on a 50:50 basis, but when it falls below $60, the government’s share comes to zero.

About 100,000 barrels of oil and four billion cubic feet of gas are produced locally every day.

Besides Rs6 to Rs14 per litre petroleum levy, the government also charges 17pc GST on prices of all petroleum products. At present the petroleum levy is at its maximum permissible limit under the law.

Published in Dawn, December 30th, 2014

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