Another jump sees petrol near Rs250

Published July 1, 2022
Finance Minister Miftah Ismail (R) and Minister of State for Petroleum Musadiq Malik (L) address a press conference in Islamabad on Thursday. — PID website
Finance Minister Miftah Ismail (R) and Minister of State for Petroleum Musadiq Malik (L) address a press conference in Islamabad on Thursday. — PID website

• New ex-depot rates of HSD and LDO stand at Rs276.54 and Rs226.15 per litre
• Country’s fuel consumption jumped 20pc in last two months despite rising prices
• Miftah says petroleum levy applied to revive stalled IMF loan programme

ISLAMABAD: As committed to the International Monetary Fund (IMF), the government on Thursday revived the petroleum levy and increased prices of all petroleum products by about Rs14-19 per litre with immediate effect.

According to a notification issued by the finance ministry, the government imposed a Rs10 per litre petroleum levy on petrol and Rs5 each on high-speed diesel (HSD), kerosene and light diesel oil (LDO).

As a result, the per-litre price of petrol has been increased by Rs14.85, HSD by Rs13.23, kerosene by Rs18.83 and LDO by Rs18.68.

Addressing a press conference in Islamabad soon after the price hike notification was issued, Finance Minister Miftah Ismail said the petroleum levy had been imposed to revive the IMF programme suspended four months ago after the PTI government reneged from signed agreements.

Because of the subsequent fuel price hikes and the revival of the petroleum levy, “substantial progress” has been achieved with the IMF and it had agreed to increase the programme size to $7bn from $6bn, he said.

The minister said that under the PTI’s agreement with the international lender, the prices of petrol and diesel should have been Rs70 per litre higher as it had committed to not only increasing the levy to Rs30 per litre but also imposing a 17pc GST.

Mr Ismail said the PTI caused a Rs233bn loss of revenue on account of the petroleum division alone and, combined with other things, led to about Rs5 trillion fiscal deficit — the highest ever in Pakistan’s history.

He said global crude oil prices were $85-90 a barrel when the previous government decided to renege on a just-concluded agreement with the IMF by removing taxes and reducing prices. These prices are now hovering around $114 a barrel.

Minister of State for Petroleum Musadik Malik, who accompanied the finance minister on the occasion, also hinted at an about 45pc increase in gas prices soon.

He said new legal documents were coming up every day before the government showing how the PTI had changed laws under which the prices determined by the Oil and Gas Regulatory Authority (Ogra) would stand automatically notified within 40 days even if the government do not clear it.

Ogra had determined 45-46pc increase in natural gas prices on June 3. As such, these prices have to go up by July 13.

The petroleum levy was reduced to zero in the March 1 price revision when international prices went up and the then PTI government decided to not only reduce petroleum prices by Rs10 per litre but also freeze it for the next four months — until the end of June.

However, the PML-N-led coalition government has been increasing petroleum prices since May 15 under the IMF deal.

With this additional tax, the ex-depot price of petrol now stands at Rs248.74 per litre, HSD at Rs276.54, kerosene at Rs230.26, and LDO at Rs226.15.

The prices of petrol, HSD, kerosene and LDO have skyrocketed 66pc (or Rs99), 92pc (132.39), 95pc (Rs111.95) and 80pc (Rs100.59) since May 26, when the coalition government introduced the first of a series of fuel price hikes.

Despite a drastic jump in prices, the country’s fuel consumption has grown Rs18-20pc in the last couple of months.

The government has given an assurance to the IMF to gradually increase the petroleum levy on all products by Rs5 per litre every month to a maximum of Rs50 per litre.

For this to achieve, the government has also secured powers from parliament under the Finance Bill 2022 to impose the levy on all petroleum products to a maximum of Rs50 per litre and that of liquefied petroleum gas (LPG) be gradually increased to Rs30,000 per tonne from its existing rate of Rs4,670 per tonne.

At present, the GST is zero on all the key products, including petrol, HSD, kerosene and LDO, against 17pc normal GST. The government is also charging about Rs20 per litre custom duty on petrol and HSD.

The previous government had given a commitment to the IMF for a Rs4 per litre increase in the petroleum levy from December 2021 and then on the first of every month to a maximum of Rs30 per litre but then reversed it on Feb 28.

Musadik Malik said the new government had stopped the downfall of the country’s fiscal position that was leading it towards default a few weeks ago. He conceded the price hike would increase the difficulties of the poor and the middle class, but their hardships would have been greater had the country been allowed to slip towards bankruptcy.

He said that unlike the previous government, “which provided all Covid-related assistance to the rich”, any external support would be diverted towards middle-income sections and those looking for jobs would be given assistance to create jobs.

Mr Malik promised tough times would be over in three to four months and the country would not only stabilise but shift gears towards progress and employment creation.

Published in Dawn, July 1st, 2022

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