Ogra proposes Rs7-9 per litre increase in petrol, diesel prices

Updated 30 Jul 2020

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Govt to reduce petroleum levy to provide some relief to masses.
Govt to reduce petroleum levy to provide some relief to masses.

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Wednesday proposed an increase of about Rs7-9 per litre in petrol and high speed diesel (HSD) for next month and about Rs6 per litre increase in kerosene and light diesel oil (LDO) rates.

However, the government is expected to increase the price of petrol and HSD by Rs4-5 per litre by bringing down the rate of petroleum levy and allow about Rs6 per litre increase for kerosene and LDO.

Informed sources said that Ogra, which was bypassed last month in petroleum price adjustments, has this time forwarded a working paper to the government to inc­re­a­se petroleum prices based on existing tax rates and import costs of the Pakistan State Oil (PSO).

The sources said the government was expected to finally increase the price of petrol and HSD by Rs4-5 per litre by bringing down the rate of petroleum levy and allow about Rs6 per litre increase for kerosene and LDO.

They said the ministries of finance and petroleum had not been able to reach consensus because of the considerations for revival of the stalled the International Monetary Fund programme and political pressure on the eve of Eidal Azha as last month’s 27-66 per cent sudden shock attracted a lot of criticism.

There were also arguments for depoliticising the petroleum pricing beyond policy decision and letting the price calculations by Ogra to be final. The sources said the matter would be taken up with the Prime Minister Imran Khan for a decision before a final announcement.

As per calculations, the ex-depot price of petrol is estimated at about Rs107.11 instead of Rs100.10 per litre at present, showing an increase of Rs7 or 7pc. Based on existing tax rates and the PSO’s import cost, the ex-refinery or import parity price was worked out at about Rs52 per litre. The product is mostly used in private transport, small vehicles and two-wheeler.

On the other hand, the ex-depot price of HSD is estimated at about Rs111 per litre from its existing rate of Rs101.46 per litre, up by Rs9.55 per litre or 9pc. The ex-refinery cost of diesel is now estimated at about Rs51 per litre. The HSD is mostly used in heavy transport vehicles and agricultural engines like trucks, buses, tractors, tube wells and threshers etc.

The ex-depot price of Kerosene oil is estimated at Rs65.32 instead of Rs59.06 per litre at present, an increase of Rs6.26 per litre or 11pc.

Also, the ex-depot price of LDO has been estimated at Rs62.20 per litre instead of Rs55.98 per litre at present, showing an increase of Rs6.22per litre or about 11pc. LDO is mostly used in flour mills and a couple of power plants.

The government is now charging about Rs47 per litre taxes on petrol and HSD as the petroleum levy on both items is now set at a maximum permissible level of Rs30 per litre. The government has already increased the general sales tax (GST) on all petroleum products to a standard rate of 17pc across the board to generate additional revenues. Until January last 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 almost quadrupled the rate of petroleum levy on HSD and petrol to Rs30 per litre from Rs8 per litre in January last year. The levy on kerosene and LDO remains unchanged at Rs6 and Rs3 per litre respectively.

Over the last many months, the government had been increasing petroleum levy rates instead of GST as the levy remains in the federal kitty unlike GST that goes to the divisible pool taxes and thus about 57pc cent share is grabbed by the provinces.

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.

Average petrol sales are touching 700,000 tonnes per month against monthly consumption of around 600,000 tonnes of diesel. The sales of kerosene oil and LDO are generally less than 11,000 and 2,000 tonnes per month.

Published in Dawn, July 30th, 2020