ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Thursday worked out a substantial increase in the prices of all petroleum products for a month with effect from April 1.

In a summary sent to the government, Ogra recommended 2.74 per cent increase in the price of high-speed diesel (HSD), 2.44pc in petrol, 29.6pc in kerosene and 17.6pc in light diesel oil (LDO).

Based on existing tax rates and import cost, the regulator calculated an increase of Rs2 per litre in ex-depot price of petrol to Rs75 a litre from the existing rate of Rs73.

Likewise, it worked out an increase of Rs2 per litre in the ex-depot price of HSD at Rs84 a litre compared to the current rate of Rs82.

Similarly, Ogra recommended an increase of Rs13 a litre in the ex-depot price of kerosene to Rs57 from Rs44. Also, it proposed a Rs7.75 per litre increase in the price of LDO to Rs51.75 compared to its existing rate of Rs44.

Interestingly, Ogra did not take into account the rate of general sales tax at 30pc on HSD as notified by the Federal Board of Revenue and instead applied 31pc rate of general sales tax (GST) to recommend higher HSD price to the desire of the finance ministry. This is the fourth time in a row that the regulator has followed finance ministry’s instruction to adopt 31pc GST to calculate HSD price even though this rate stood legally abolished on Dec 31, 2016.

The regulator relied on “secret but written instructions” from the finance ministry through the petroleum ministry to apply 31pc GST while calculating HSD price build-up. As a result, the regulator calculated an increase of Rs2.18 per litre, and the prime minister and the finance minister graciously decided to increase only 1.52 per litre increase in diesel price. The GST on petrol at present is 15.5pc.

Informed sources said petroleum ministry and Ogra officials were under extreme pressure not to disclose tax rates on various products to the media to avoid “unnecessary” controversies in parliament.

An Ogra official said the regulator had calculated the prices on the basis of imports made by Pakistan State Oil (PSO) in March and notified GST and petroleum levy rates on all products, except for HSD where it applied 1pc higher than notified GST rates.

Finance Minister Ishaq Dar is expected to announce a formal government decision after consulting the prime minister on Friday (today). In line with an ongoing practice, the government is expected to pass on a partial increase in petroleum prices, these sources said.

An official said the Ministry of Petroleum and Ogra have been recommending for months a substantial increase in the prices of kerosene and LDO to minimise a huge price differential with petrol. The price differential of about Rs29 per litre between petrol and the two other products was encouraging dishonest market operators to mix kerosene with petrol for higher profits and resulting in adulterated and poor quality petrol in the market instead of higher grade (92 research octane number, or RON) being charged to consumers. The regulator recommended an increase of Rs13 a litre in the price of kerosene, but the government has been keeping its price unchanged saying it wanted to protect poor people.

Interestingly, kerosene is the only regulated petroleum product but is not available below Rs80 in the open market while all other products are deregulated and are available reasonably within the price band announced by the government.

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. For example, HSD sales across the country are now going beyond 800,000 tonnes a month against petrol’s monthly consumption of around 700,000 tonnes. Monthly sales of kerosene and LDO are generally less than 10,000 tonnes.

Published in Dawn, March 31st, 2017

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Avenfield relief
Updated 30 Sep, 2022

Avenfield relief

Accountability cannot continue to be treated like a revolving door in which politicians can be shoved in or pulled out on a whim.
Dar’s plans
Updated 30 Sep, 2022

Dar’s plans

For starters, the country doesn’t have spare dollars to burn.
Another targeted attack
30 Sep, 2022

Another targeted attack

WEDNESDAY’S deadly attack on three Chinese-origin individuals in Karachi’s Saddar area demonstrates the threat...
More leaks
Updated 29 Sep, 2022

More leaks

Recent leaks look more like an inside job than the work of a foreign power.
A depressing winter
29 Sep, 2022

A depressing winter

WINTER is on its way, with a massive gas crunch looming as elevated global LNG prices have eroded the cash-strapped...
Great expectations
29 Sep, 2022

Great expectations

CONSIDERING that the Afghan Taliban have been in the saddle for over a year now, the UN has expressed frustration...