ISLAMABAD: For the fifth fortnight in a row, the government on Sunday increased the prices of all petroleum products by 2.5 per cent to 4.6pc for the next 15 days.

According to an announcement by the Prime Minister Office, the ex-depot prices of high speed diesel (HSD) and petrol were increased by Rs2.88 and Rs2.70 per litre, respectively. The prices of kerosene and light diesel oil (LDO) were jacked up by Rs3.54 and Rs3per litre, respectively.

As such, the ex-depot price of HSD rose to Rs116.07 per litre from Rs113.19, showing an increase of Rs2.88 or 2.54pc. HSD is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube-wells and threshers. This is one of the key contributors to inflation. Its price has increased by 14.67pc (Rs14.85) since November 30 when it was sold at Rs101.22 per litre.

The price of petrol increased to Rs111.90 per litre from Rs109.20, showing a rise of Rs2.70 (2.47pc). Petrol is mostly used in private transport, small vehicles, rickshaws and two-wheelers. Petrol price has gone up by 11.13pc (Rs11.20) since November 30 from Rs100.69 per litre.

Petrol to cost Rs2.70 more per litre, diesel Rs2.88

The ex-depot price of kerosene was increased by Rs3.54 per litre (4.61pc) to Rs80.19 from Rs76.65. Kerosene is mostly used by unscrupulous elements for mixing it with petrol and to some extent for lighting in very remote areas. Kerosene price has jumped by 18.6pc (Rs14.90) over the past two months from Rs65.29 per litre on November 30.

The ex-depot rate of LDO was increased by Rs3 per litre (3.93pc) to Rs79.23 from Rs76.23. LDO is consumed by flour mills and a couple of power plants. Its price has surged by more than 26pc (Rs16.37) over the past five fortnights from Rs62.86 per litre.

Under a government instruction, the Oil and Gas Regulatory Authority (Ogra) is required to calculate oil prices on the basis of 17pc general sales tax and maximum petroleum levy permissible under the law at Rs30 per litre on HSD and petrol. The government later announces a lower than Ogra-determined prices on political considerations and also leaks the regulator’s summary to select media.

Based on 17pc GST and Rs30 per litre petroleum levy, Ogra had calculated an increase of Rs13.18 per litre for petrol, Rs12.12 for HSD, Rs11.10 for kerosene and Rs6.62 for LDO, according to the PM Office.

It claimed that contrary to Ogra’s recommendations for higher price increase, the prime minister keeping in mind the public interest approved a lower price increase. This is despite the fact that petroleum levy on all products under gazette notification is almost Rs7-9 per litre lower than that of Ogra’s calculations.

An official said the government had already collected about 33pc higher than targeted revenue on petroleum products through petroleum levy in the first six months of the current fiscal year. Therefore, it was comfortable with minor adjustments in petroleum levy. It reduced the levy on petrol by 52 paisa to Rs21.04 per litre. Likewise, it cut the levy on HSD by about 98 paisa to Rs22.11 per litre.

On the other hand, it increased petroleum levy on LDO by Rs6.24 to Rs6.91 per litre from just 67 paisa.

As such, the government is now charging about Rs41 per litre tax on petrol and Rs42 on HSD. Over the past several months, the government has been tweaking with petroleum levy rates instead of GST as the levy remains in the federal kitty while GST goes to the divisible pool taxes and thus about 57pc share is grabbed by the provinces.

Petrol and HSD are two major products that generate most of the 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 the monthly HSD consumption of around 600,000 tonnes. Sales of kerosene and LDO are generally less than 11,000 and 2,000 tonnes per month, respectively.

Under a mechanism, oil prices are revised by the government on a fortnightly basis to pass on international prices published in Platt’s Oilgram instead of the previous mechanism of monthly calculation on the basis of import cost of the state-owned Pakistan State Oil.

Published in Dawn, February 1st, 2021