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Petrol to become slightly cheaper

Updated March 31, 2018

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ISLAMABAD: Except for a substantial cut in petrol price, all the other petroleum products are estimated to become slightly expensive for a month mainly because of currency depreciation, according to official calculations.

However, the government is expected to keep all the prices unchanged except for a minor cut in petrol price to protect its revenue stream at the existing level, an official said. He said the international oil prices had slightly come down in March but the impact of currency depreciation was having adverse impact.

Based on existing tax rates and import prices reported by Pakistan State Oil (PSO), the Oil and Gas Regulatory Authority (Ogra) on Friday worked out a reduction of Rs5.26 per litre in the price of petrol for April.

The regulator also recommended an increase of 65 paisa per litre for high speed diesel, 55 paisa per litre in light diesel oil and 13 paisa per litre in kerosene.

Interestingly, the next month prices have been worked out on the basis of higher than notified tax rates for HSD on the orders of the Ministry of Finance to enable the government to announce a relatively lower rate for political objectives.

As such, if the regulators’ calculations are approved by the prime minister, the price of HSD would go up by 0.7 per cent, kerosene by 0.2pc and LDO by 0.8pc. The petrol price on the other hand is estimated to fall by 6pc.

In a summary sent to the government, Ogra maintained that the adjustment in prices of petroleum products was required to pass on the impact of fluctuation in international oil prices and the rupee against US dollar during March.

Therefore, on the basis of existing tax rates and imported cost of PSO, Ogra calculated the new ex-depot price of HSD at Rs99.10 per litre instead of existing rate of Rs98.45 per litre.

For petrol, the ex-depot price was worked out at Rs82.81 per litre instead of existing rate of Rs88.07 per litre.

Likewise, Ogra calculated ex-refinery price of kerosene at Rs76.59 per litre against existing rate of Rs76.46 per litre, showing an increase of 13 paisa per litre. Also, it proposed 55 paisa per litre increase in the price of LDO to Rs65.85 instead of existing rate of Rs65.30. The summary has been forwarded to the petroleum division that would seek its approval from the prime minister through the ministry of finance.

In an order, the finance ministry has ordered calculation of prices on the basis of 31pc GST on high speed diesel (HSD) and 17pc on all the other products. This is despite the fact that notified-GST rate on HSD at present was 25.5pc at present.

In addition, the government is also charging Rs8 per litre petroleum levy on HSD, Rs10 per litre on petrol and Rs6 and Rs3 per litre on kerosene and light diesel oil (LDO) respectively.

Under the practice in vogue, oil prices are revised on the last day of every month.

Prime Minister Shahid Khaqan Abbasi has been allowing gradual increase in the price of LDO and kerosene to bridge a price differential with petrol to minimise mixing of the two projects.

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

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

Published in Dawn, March 31st, 2018