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Ogra proposes increase in petrol, diesel prices by December

Updated November 30, 2017

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Petrol sales generate substantial revenues for the government because of its massive consumption. Its monthly use is nearly 700,000 tonnes.
Petrol sales generate substantial revenues for the government because of its massive consumption. Its monthly use is nearly 700,000 tonnes.

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) worked out on Wednesday an increase of Rs1.48 and Rs1.20 per litre in the prices of petrol and high-speed diesel (HSD), respectively, for December.

The regulator also recommended an increase of Rs15.35 and Rs13.15 per litre in the prices of kerosene and light diesel oil (LDO), respectively.

However, oil companies will be at will to set the end price of HSD after deciding the quantum of margins for themselves and dealers in view of a recent decision by the government to deregulate diesel rates.

As such, if the regulators’ calculations are accepted, the price of kerosene will go up by 28.9 per cent while that of LDO by 26.8pc.

The price of petrol should increase by 1.9pc while that of HSD by 2.4pc on the basis of Ogra’s calculations based on existing tax rates and the imported cost. The government is expected to pass on the full increase recommended by the regulator, an official said.

In a summary sent to the government, Ogra said the adjustment in prices of petroleum products was required to pass on the impact of the increase in international prices during November.

The rate of kerosene is likely to go up 29pc

Therefore, Ogra calculated the new ex-depot price of petrol at Rs77.99 per litre instead of the existing rate of Rs75.99 per litre.

In the case of HSD, Ogra worked out only the ex-refinery price based on the average import cost provided by PSO, saying that retail prices were deregulated by Prime Minister Shahid Khaqan Abbasi on Oct 6 as chairman of the Economic Coordination Committee of the cabinet and notified by the Petroleum Division on Oct 27.

Therefore, it worked out the ex-refinery price of HSD at Rs51.27 per litre instead of the existing rate of Rs50.07, showing an increase of 2.4pc or Rs1.20 per litre. Based on the ex-refinery price determined by Ogra, the ex-depot price of HSD was estimated to be about Rs86.50 per litre against the existing rate of Rs84.59 per litre.

Ogra recommended the ex-depot price of kerosene at Rs68.54 per litre against the existing rate of Rs53.19 per litre, showing an increase of Rs15.35 or 28.9pc. Also, it proposed an increase of Rs13.15 per litre in the price of LDO to Rs62.15 instead of the existing rate of Rs49, up 26.8pc.

An Ogra official said the regulator had calculated the prices on the basis of imports made by Pakistan State Oil (PSO) in November and notified the general sales tax (GST) and petroleum levy rates on all products.

The summary had been forwarded to the Petroleum Division that would seek its approval from the prime minister. Under the practice in vogue, oil prices are revised on the last day of every month.

The erstwhile Ministry of Petroleum under the current premier and Ogra have been recommending for almost two years a substantial increase in the prices of kerosene and LDO to minimise the huge price differential with petrol. The ministry believed that a Rs30 per litre price differential between petrol and the two other products was encouraging dishonest market operators to mix kerosene with petrol for higher profits, resulting in adulterated and poor quality petrol.

Mr Abbasi has been allowing a gradual increase in the price of LDO and kerosene that former premier Nawaz Sharif kept unchanged at Rs44 per litre for almost four years “to protect poor people”.

Interestingly, kerosene is the only regulated petroleum product, but unavailable at fixed rates anywhere in the country. All other products are deregulated and available reasonably within the price band announced by the government.

Petrol and HSD are two major products that generate a large chunk of revenues for the government because of their massive and growing consumption. The current GST rate for HSD is fixed at 31pc while it is 17pc on all other products. In addition, the government is also charging a petroleum levy at the rate of Rs8 per litre on HSD, Rs10 per litre on petrol, Rs6 per litre on kerosene and Rs3 per litre on LDO.

HSD sales across the country are now going beyond 800,000 tonnes per month against monthly consumption of around 700,000 tonnes of petrol. Sales of kerosene and LDO are generally less than 10,000 tonnes per month.

Published in Dawn, November 30th, 2017