Govt set to announce another hike in petroleum prices to fill up revenue gaps

Updated Mar 31 2019


Petrol and HSD are two major products that generate most revenue for the government. — APP/File
Petrol and HSD are two major products that generate most revenue for the government. — APP/File

ISLAMABAD: With a slight increase in international crude price and currency devaluation, the government is considering a major increase in the prices of all petroleum products for the month of April.

Based on import parity price of Pakistan State Oil (PSO) for purchase in March, the Oil and Gas Regulatory Authority (Ogra) has worked out about Rs11.17 per litre increase in the price of high speed diesel (HSD), Rs11.91 in petrol, Rs6.65 in kerosene and Rs6.49 in light diesel oil (LDO) .

As such, the ex-depot rate of HSD has been calculated at Rs122.60 per litre from about Rs111.43, showing an increase of 10 per cent. Likewise, the ex-depot petrol price has been proposed to go up to Rs104.80 per litre from existing rate of Rs92.89 per litre, up 12.8pc.

A senior government official told Dawn that Ogra on Friday moved a summary to the government containing calculations on petroleum prices on the basis of existing rates of general sales tax and petroleum levy.

An official said the price of Brent benchmark had increased by less than 2pc over the last month from $66.57 on Feb 28 to $67.86 per barrel on March 28.

The price of kerosene has been proposed to be set at Rs92.96 per litre instead of Rs86.31, an increase of 7.7pc. The ex-depot price of LDO has been worked out at Rs84.03 per litre instead of existing Rs77.54pc litre, an increase of 8.4pc.

The government has already increased general sales tax (GST) on all petroleum products to standard rate of 17pc across the board to generate additional revenues. Until January this year, the government was charging 0.5pc GST on LDO, 2pc on kerosene, 8pc on petrol and 13pc on HSD.

Besides the 17pc GST, the government has more than doubled the rate of petroleum levy on HSD in recent months to Rs18 instead of Rs8 per litre, while levy on petrol had also been increased by 40pc to Rs14 instead of Rs10 per litre. The petroleum levy on kerosene oil and LDO remains unchanged at Rs6 and Rs3 per litre respectively.

Over the last two months, the government has started increasing petroleum levy rates to partially recoup a major revenue shortfall faced by the Federal Board of Revenue. Petroleum products remains in the federal kitty unlike GST that goes to the divisible pool of taxes and thus about 57pc cent share is grabbed by the provinces.

The petrol and HSD are two major products that generate most revenue for the government because of their massive and yet growing consumption in the country. Total HSD sales are touching 800,000 tonnes per month against monthly consumption of around 700,000 tonnes of petrol. The sales of kerosene oil and LDO are generally less than 10,000 tonnes per month.

Petroleum prices have generally been on the rise since early 2017 barring few reductions. Over the last couple of weeks, the international benchmark Brent has been inching up and the government has been mopping up tax rates in run up to finalisation of an International Monetary Fund assisted stabilisation programme.

The government has already announced to gradually increase electricity and gas rates over the next few months.

Published in Dawn, March 30th, 2019