KARACHI, Sept 26: With elections around the corner, the government has preferred to suffer a revenue loss of Rs326.6 million per month by cutting down the petroleum development levy (PDL) on petrol, diesel and kerosene.

Sources in oil industry told Dawn on Thursday that the government has cut the PDL on petrol by 16 paisa per litre followed by 66 paisa per litre on kerosene and 40 paisa on high speed diesel (HSD).

A break-up of individual loss of revenue on specific oil products reveals that the government is set to lose Rs278.6 million per month on HSD in terms of PDL, while Rs20 million on petrol and Rs28 million on kerosene.

The government has taken a hit on itself by losing a revenue aimed at keeping the domestic price hike minimum and protecting the consumers. Oil prices were forecast to rise two to six per cent in the last price adjustment by the Oil Companies Advisory Committee (OCAC) in view of rising global oil prices after war like situation between the US and Iraq.

“This move will definitely create a pressure on the tax collection drive of the government, which is already chasing a tough target of Rs461 billion for the current fiscal,” oil analysts said.

The government, however, holds the option to increase or decrease the PDL on every fortnight price revision keeping in view the revenue position. In case, it maintains the PDL for at least a fortnight, then the loss is estimated at Rs149 million every fortnight and Rs2.5 billion for the remaining nine months of the current fiscal.

Pakistan’s annual consumption of these three oil products is estimated at 8.5 million tons in which the share of diesel stands at seven million tons. Annual consumption of petrol and kerosene is estimated at 1.1 million tons and 425,000 tons respectively.

A total of 91,600 tons of petrol is consumed every month while the demand of diesel and kerosene is 583,333 tons and 35,416 tons respectively.

As another price adjustment is due on September 30, it could not be known whether the government will again adjust the PDL or the decision in this regard will be left for the new political government after conclusion of general elections on October 10.

It may be noted here that five basic elements constitute the consumer prices of petroleum products in Pakistan which are ex- refinery price, government levies (excise duty and PDL), inland freight, distributor and dealer margins and sales tax.

About government levies on oil products, prior to new change in PDL on September 19, the government was charging excise duty and PDL of Rs12.87 per litre on petrol. In diesel, it was Rs2.76 per litre representing PDL only.

The government levies are the prerogative of the government and hence are fixed in accordance with the needs of the government. Petroleum products are an important source of any government’s revenue.

A 15 per cent sales tax is calculated in consumer pricing and this varies in accordance with the movement in the price of various products based on the FOB value and the rupee/dollar parity.

In diesel, which is priced at 19.76 per litre, the share of total taxes and levies comes to 31.38 per cent per litre. The price of petrol is Rs34.66 per litre which includes 49.71 per cent government taxes and levies. In kerosene’s price of Rs18.61 per litre, the share of taxes and duties is 26.81 per cent.