Major increase in oil prices likely

Published June 30, 2021
Currently, the ex-depot price of HSD is Rs112.55 per litre and that of petrol Rs110.69 per litre. — AFP/File
Currently, the ex-depot price of HSD is Rs112.55 per litre and that of petrol Rs110.69 per litre. — AFP/File

ISLAMABAD: The prices of all petroleum products may go significantly up on Wednesday (today) owing to higher international prices and some adjustments in tax rates.

Three different options are under consideration of the government.

Under one option, based precisely on existing tax rates and oil import price, the ex-depot price of high speed diesel (HSD) is estimated to go up by Rs3 per litre and that of petrol by about Rs6 per litre.

Under the second option which is based on standard 17pc GST and full petroleum levy permissible under the law, the ex-depot prices of HSD and petrol are calculated to go up by Rs34 and Rs37 per litre, respectively. Under the law, the government can increase petroleum levy to a maximum of Rs30 per litre on HSD and petrol, Rs12 on kerosene and Rs10 on light diesel oil (LDO).

Officials said that based on current year’s revised revenue estimates, the government is expected to adopt a third option. This means that the tax rates — petroleum levy in case of HSD and petrol and both petroleum levy and GST in case of kerosene and LDO — would be slightly increased in addition to passing on the impact of higher imported prices. In that case, the prices of all products will be increased in the range of Rs7-9 per litre.

Hike to be based on higher international prices, tax adjustments

Currently, the ex-depot price of HSD is Rs112.55 per litre and that of petrol Rs110.69 per litre.

The government had already collected higher than targeted revenue on petroleum products through petroleum levy in the 11 months of the current fiscal year. Therefore, it was comfortable with minor adjustments in petroleum levy. According to the ministry of finance, the collection on account of petroleum levy had amounted to Rs370 billion in the first nine months of current fiscal year against the annual target of Rs450bn.

Over the last two years, 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 57 per cent share of it is given to the provinces.

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 2,000 tonnes per month, respectively.

Under the revised mechanism, oil prices are revised by the government on a fortnightly basis to pass on the impact of 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, June 30th, 2021

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