The government on Wednesday increased the price of petrol by Rs2 per litre and that of high speed diesel (HSD) by Rs1.44 per litre.
According to a notification from the Ministry of Finance, the price of petrol will be Rs112.69 per litre and that of HSD will be Rs113.99 per litre starting July 1 (tomorrow).
In addition, the prices of kerosene and light diesel oil (LDO) have been raised by almost Rs4, to Rs85.75 and Rs83.4 per litre, respectively.
The notification stated that the government has "maintained the practice of keeping the prices of petroleum products at an affordable level". The Oil and Gas Regulatory Authority (Ogra) had been recommending substantial increase in the prices of petroleum products since May 1 in view of the rising prices in international markets, it said.
However, the government had "absorbed the impact of the increase by making adjustments in sales tax and petroleum levy", it added. "The petroleum levy rates are at the lowest in six years," it further stated.
Meanwhile, Special Assistant to Prime Minister on Political Affairs (SAPM) Shahbaz Gill shared that Ogra had recommended an increase of Rs5-6 per litre in the price of petrol keeping in view increase in rates in international markets.
"But the prime minister only allowed increase of Rs2 per litre. It was recommended to raise the price of diesel by Rs3.44 per litre but only an increase of Rs1.44 was allowed," he tweeted.
Earlier this month, the government had increased the prices of all petroleum products by up to four per cent to pass on partial impact of increase in international prices.
The government had to reduce its tax on petrol and diesel to allow a minimum increase. Otherwise, based on existing rates, Ogra had worked out significantly higher prices.
The government had already collected higher-than-targeted revenue on petroleum products through petroleum levy in the 11 months of the current fiscal. Therefore, it was comfortable with minor adjustments in the petroleum levy.
According to the Ministry of Finance, the collection on account of petroleum levy had amounted to Rs370 billion in first nine months of the current fiscal against annual target of Rs450bn. The actual collection through petroleum levy has now been revised to Rs500bn as part of budget 2021-22.
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 57pc share is received 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.