ISLAMABAD: With political challenges ahead, particularly the Senate elections, the federal government on Sunday decided not to increase petroleum prices.
“The government has decided that the prices of petroleum products will remain the same for the first fortnight of March 2021,” said an announcement by the finance ministry.
This is the second fortnight that the government did not increase petroleum prices despite higher import cost for five consecutive fortnights.
The ex-depot prices of High Speed Diesel (HSD) and petrol would remain unchanged at Rs116.07 and Rs111.90 per litre, respectively. Likewise, the ex-depot price of kerosene and LDO would remain at the existing rates of Rs80.19 and Rs79.23 per litre, respectively.
To maintain the prices at the existing level, the government had to cut petroleum levy on all products. The petroleum levy on petrol was reduced by Rs5.32 per litre to Rs12.65 from Rs17.97 for the next fortnight. The petroleum levy on HSD was also scaled down by Rs5.83 per litre to Rs12.53 from Rs18.36. The levy on kerosene and LDO was reduced by Rs2.66 per litre and Rs1.29 per litre, respectively.
On February 15, the government had reduced the petroleum levy by Rs3.07 on petrol, Rs3.75 on HSD, Rs2.78 on kerosene and by Rs3.26 per litre on LDO.
Except for these two fortnights, the government has been increasing prices of petroleum products every fortnight since November 30 last year to pass on the impact of higher international oil prices. Since then the government increased the prices of HSD by 14.67pc (Rs14.85 per liter), that of petrol by 11.13pc (Rs11.20 per liter), of kerosene by 18.6pc (Rs14.90 per liter) and LDO by more than 26pc (Rs16.37 per liter).
Under the government instructions, the Oil and Gas Regulatory Authority is required to calculate oil prices on the basis of 17pc general sales tax and maximum petrol levy permissible under the law at Rs30 per liter on HSD and petrol.
An official said the government had already collected almost 30pc higher than targeted revenue on petroleum products through petroleum levy in the first six months (July-December) of the current financial year. Therefore, it was comfortable with minor adjustments in the petroleum levy. According to the ministry of finance, the collection on account of petroleum levy has amounted to Rs275bn in first six months of the current financial year against the annual target of Rs450bn.
Over the past two years, the government has been tweaking with petroleum levy rates instead of GST as levy remains in the federal kitty while GST 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 the monthly consumption of around 600,000 tonnes of HSD. The sales of kerosene and LDO are generally less than 11,000 and 2000 tonnes per month.
Under the revised mechanism, oil prices are revised fortnightly to pass on international prices published in Platt’s Oilgram instead of previous mechanism of monthly calculations on the basis of import cost of the Pakistan State Oil.
Published in Dawn, March 1st, 2021