KARACHI, Sept 23: Shell Pakistan said on Thursday that the government should increase retail petroleum prices because the recent freeze on prices wasn't sustainable due to rising global oil prices and revenue shortfalls from a key petroleum tax.

"It is prudent for the government to pass on the increase in oil prices to the consumers," said Shell Pakistan's chairman Farooq Rehmatullah at a news conference. Shell Pakistan is a unit of Royal Dutch/Shell.

He said the government had reduced the petroleum development levy - the key tax on the sale of petroleum products - to zero in order to avert a price increase on the domestic market.

"International prices have continued to increase even during the last fortnight," said Rehmatullah, adding the freeze on retail prices isn't sustainable. Rehmatullah said the government hasn't collected any revenue from the petroleum tax which had aimed to raise Rs37.5 billion during the fiscal year ending June 2005.

He said the oil industry was in talks with the government about passing on oil increases to domestic consumers. Since May, Pakistan has resisted that, to avoid political repercussions at a time when it's trying to control soaring food-price inflation.

Rehmatullah, who also spoke about the financial results of the year ended June 30, said the company reported a 20pc rise in August's net profit to Rs1.5bn - mainly on the back of improved margins arising from a better petroleum product mix such as better sales of key motor gasoline and jet fuel. -Dow Jones Newswires