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Govt raises Rs93bn from oil, gas surcharges

September 04, 2007

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ISLAMABAD, Sept 3: The government earned a record Rs93bn in surcharges and royalties on oil and gas during the last fiscal year, which was 94pc more than the original estimates of Rs48bn, according to the latest official data.

This is in addition to about Rs64bn yielded in revenues from petroleum products last year through indirect taxes like general sales tax. As such, total revenue — both in direct and indirect levies — on natural gas and oil products comes to about Rs157bn, sources in the government suggest.

Last week, the government increased petroleum development levy (PDL) to ensure that its Rs25bn target for PDL collection for the current year is easily surpassed, they said. At the same time, the government stopped oil marketing companies (OMCs) and dealers from charging commissions on PDL.

Earlier, the country had never collected such huge revenues on oil and gas although surcharges used to be treated as a major revenue-generating source.

In the 2006-07 budget, the government had announced to treat petroleum products as non-revenue items. The highest-ever direct revenue on account of oil and gas was in 2005-06 when it stood at Rs75.50bn.

The consolidated full year budgetary position for 2006-07 released by the finance ministry suggests that the government collected Rs29.70bn as development surcharge on petroleum against a zero revenue target under this head because the government had announced not to raise revenue from oil prices to protect them against higher international prices.

This was 13pc higher than the PDL collection in 2005-06 when it was assumed as a formal revenue source.

The highest earning came in the shape of gas development surcharge (GDS) for which the government had fixed a target of Rs18bn in 2006-07. However, actual collection stood at about Rs35bn, showing an increase of over 94pc. When compared with the Rs26.30bn GDS collection in the 2005-06, the GDS was up by almost 33pc.

The collection of royalty on oil and gas in 2006-07 also was much higher than the original target. The government had estimated to collect Rs20.55bn as royalties on oil and gas but was able to earn Rs28.50bn, showing an increase of about 39pc. This was about 15pc more from Rs24.80bn in 2005-06.The royalties on oil and gas are transferred to the provinces as part of the net proceeds of the divisible pool. Similarly, gas development surcharge also goes to the provinces, depending on their share in gas production. The PDL, on the other hand, goes to the federal revenue.

The actual collection in oil and gas revenue in 2006-07 had been about 23pc more than Rs68bn in 2005-06 when the government had announced collection of a substantial amount in the form of the PDL.

Last year, the government said it was not imposing any PDL on kerosene, diesel and light diesel oil. It said the PDL received from petrol was being used to subsidise these products by paying off petroleum differential claims (PDC) to OMCs and refineries. The government paid Rs25bn in 2006-07 to the OMCs and refineries as price differential claim against its announcement to provide Rs10bn subsidy on petroleum products.

During the current year, the government plans to raise Rs81bn on account of oil and gas surcharges and royalties. It plans to provide Rs15bn to the refineries and OMCs. The indirect tax collection on account of general sales tax on these products is never made public, although it automatically becomes part of sales tax collection.