ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has recommended up to Rs8 per litre (5.87 per cent) reduction in prices of petroleum products with effect from April 1 to pass on the benefit of lower international market price to consumers.

An official confirmed that Ogra had forwarded its summary on price reduction to the petroleum ministry which would be passed on to the finance ministry for seeking formal approval from Prime Minister retired Justice Mir Hazar Khan Khoso.

Based on existing taxes and levies, Ogra has worked out a reduction of Rs1.76 per litre in the price of petrol (motor gasoline). The proposed cut will bring the price down to Rs101.3 from existing rate of Rs103.07 per litre, down by 1.70 per cent.

The price of high speed diesel (HSD) has been estimated to come down by Rs1.45 per litre to Rs107.76 per litre from Rs109.21, down by 1.32 per cent.

The Ogra has also proposed cutting down kerosene price by Rs4.69 per litre to Rs95.21 per litre from its current rate of Rs99.90 — a reduction of 4.69 per cent. The price of light diesel oil (LDO) will come down to Rs89.40 per litre from Rs94.33 — a cut of 5.23 per cent.

According to Ogra calculations, the price of high octane blending component (HOBC) should be reduced by Rs8.03 per litre to Rs128.68 per litre from the current average rate of Rs136.71 per litre, down by 5.87 per cent.

The ministry of finance, however, has indicated that it would like to maintain existing prices for another month to restore the rates of petroleum levy at the highest level permissible under the finance bill. The levy had been scaled down by former prime minister Raja Pervez Ashraf on March 3 following criticism from the opposition and members of his own party.

Under that decision, the petroleum levy was reduced on petrol from Rs10 to Rs6.47 per litre while the levy on diesel was reduced from Rs8 to Rs3.65 per litre. On March 1, the petroleum prices were increased by an average of four per cent, but were subsequently restored to the Feb 28 level after three days.

“If the petroleum product prices are maintained at the existing level, the government will earn an additional revenue of about Rs2 billion during April,” said a senior government official. But he added a final decision would have to be made by the caretaker prime minister.

“It remains to be seen if the caretaker prime minister’s first major decision goes in favour of the common people or is influenced by the finance ministry,” an Ogra official commented.

Under the finance bill of 2012-13 approved as part of federal budget in June last year, the government can charge a maximum petroleum levy at the rate of Rs10 per litre on petrol, Rs14 on HOBC, Rs6 on kerosene and Rs8 on HSD.

On top of that, the oil marketing companies and petroleum dealers are entitled to marketing margin of up to Rs3 per litre.

In addition, the government also collects 16 per cent GST on all products. The levy brings windfall revenue for the government in case of price increase.