ISLAMABAD: The government is expected to increase the prices of high speed diesel (HSD) and petrol by more than Rs5 and Rs3 per litre on Monday for the next month to protect its revenue and pass on the impact of higher international market rates to consumers.

Interestingly, the prices for May 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.

The finance ministry has ordered calculation of prices on the basis of 31 per cent GST on HSD and 17pc on all the other products. This is despite the fact that notified GST rate on HSD at present was 27.5pc, 17pc on kerosene, 16.5pc on light diesel oil (LDO) and 21.5pc on petrol.

In addition, the government is also charging Rs8 per litre petroleum levy on HSD, Rs10 on petrol and Rs6 on kerosene and Rs3 on LDO. The federal government has sought parliament’s approval for increasing this levy to Rs30 per litre on all products to generate additional revenue of at least Rs130 billion.

Based on existing tax rates and import prices reported by the Pakistan State Oil (PSO), the Oil and Gas Regulatory Authority (Ogra) has worked out an increase of Rs5.02 per litre in the prices of HSD and Rs3.22 in motor gasoline (petrol).

The regulator also recommended Rs6.97 and Rs6.95 per litre increase in the prices of kerosene and LDO, respectively. As such, if the regulator’s calculations are approved by the prime minister, the price of HSD would go up by 5.2pc, petrol by 3.7pc, kerosene by 9.1pc and LDO by 10.6pc.

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 the US dollar during April.

Therefore, on the basis of existing tax rates and imported cost of PSO, Ogra calculated the new ex-depot price of HSD at Rs101.47 per litre instead of existing rate of Rs96.45. This is the highest HSD rate since October 2014.

The ex-depot price of petrol was worked out at Rs89.22 per litre instead of existing rate of Rs86, highest since November 2014.

Likewise, Ogra calculated ex-depot price of kerosene at Rs83.43 per liter — highest since July 2015 — against existing Rs76.46, showing an increase of Rs6.97 or 9.1pc. Also, it proposed Rs6.95 per litre increase in the price of LDO to Rs72.25 from Rs65.30, up 10.6 pc.

The summary has been forwarded to the petroleum division that would seek its approval from the prime minister.

Prime Minister 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 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, April 30th, 2018