KARACHI: Consumers are likely to be taken for a costly ride in 2022-23 as the budget proposes raising the target of petroleum levy to Rs750 billion from Rs610bn in 2021-22.

The public is already struggling to cope with a massive increase of Rs60 per litre in petrol and diesel prices, which became effective a fortnight ago. It’s put extra pressure on the cost of living, which has already soared owing to rising food prices and bloating bills of electricity and gas.

Samir Najmul Hussain, who owns a petrol pump in Karachi, said the previous government had been gradually raising the petroleum levy to meet the condition set by the International Monetary Fund (IMF). However, it removed general sales tax (GST) to provide consumers with some relief. The petrol price was set to go up to Rs160 from Rs150 per litre a few months back, but the then government led by the PTI reduced it to Rs140 a unit.

He said the next three to four months will be tough for people as the government will try to meet the IMF condition of raising the petroleum levy as well as charging the GST on oil products.

Mr Hussain said the government will soon raise the price of petrol and diesel by another Rs25-30 per litre. The prices are projected to hover between Rs280 and Rs300 a unit in the next four to six months.

When diesel was available at Rs141.62 a unit in January, he said, the GST was Rs7.31 and the petroleum levy was Rs17.13 with no price differential claim (PDC). Now the diesel price is Rs204.15 per litre but the GST and the petroleum levy are nil. However, the PDC is Rs23 per litre versus Rs53 per litre on June 1.

When petrol was priced at Rs144.82 a unit on January 1, the petroleum levy and sales tax were Rs17.62 and Rs3.53 per litre, respectively. The PDC at the time was nil.

At the current petrol price of Rs209.86 per litre, the petroleum levy and the GST are nil. The PDC was Rs39.32 per litre on June 1 and Rs9.32 per litre on June 3.

In case the prices of finished petroleum products in world markets plunge and the rupee gains strength against the dollar, the government will be able to at least maintain petroleum prices rather than executing a substantial increase, he said.

A pump owner in Lahore, Ghiyas Paracha, said the government should encourage CNG in public transport, which will bring down the transportation charges by 43 per cent at least. Besides, it’ll also curtail the import bill of $2.1bn, thanks to the reduced volumes of imported fuels.

An analyst at Sherman Securities believed that the 2022-23 budget is inflationary due to the imposition of the levy on fuels as well as a reduction in subsidies. In order to meet the petroleum levy target, the government will have to increase oil prices by Rs30 per litre, which is unlikely given that it’s going to the election year.

However, he said, the government will be in trouble for not immediately announcing measures to placate the concerns of the IMF on revenue and subsidies. Moreover, the allocation of the levy signals the government’s intention to raise oil prices to Rs250 per litre. He expected that the average 2022-23 consumer price index inflation will increase to 13.5pc.

Published in Dawn, June 11th, 2022