ISLAMABAD: After approval by the government, the oil companies on Sunday notified a nominal reduction in prices of petrol and diesel by 77 paisa and 62 paisa per litre respectively. The new prices became effective from Sunday midnight.

The ex-depot price of petrol (motor gasoline) was fixed at Rs102.30 per litre, down by 77 paisa per litre from Rs103.07 and that of high speed diesel (HSD) at Rs108.59 per litre, down by 62 paisa per unit from Rs109.21.

Likewise, the price of kerosene oil was reduced by Rs1.64 per litre to Rs98.26 per litre. The Light Diesel Oil price was scaled down by Rs1.50 per litre to Rs92.83 per litre. According to informed sources, recommendations of the Oil and Gas Regulatory Authority (Ogra) were set aside by caretaker prime minister Mir Hazar Khan Khoso at the request of the ministry of finance.

Ogra had recommended reducing petrol, HSD, kerosene and LDP prices by 1.70 per cent, 1.32 per cent, 4.69 per cent and 5.23 per cent respectively.

The finance ministry, however, opposed Orgra recommendations and requested the prime minister to restore the earlier reduction in petroleum levy on all products which had been reduced by the PPP government on March 3 in order to recover maximum levy as approved in the finance bill. This would have increased the price of petrol by Rs1.25 per litre and that of HSD by Rs2.25 per litre.

But the prime minister directed the finance ministry to share the reduction proposed by Ogra with consumers on a 50:50 per cent. On the basis of that formula, the price of petrol should have dropped by 90 paisa per unit, that of diesel by 73 paisa, kerosene by Rs2.35 paisa and LDO by Rs2.46 per litre.

The finance ministry, however, erroneously passed on the consumer-end product prices to petroleum ministry, Ogra and oil companies without taking into account the impact of general sales tax that fluctuates on the basis of end-price because it is charged at 16 per cent of the end-price.

As a result, consumers were deprived of a 13 paisa per litre reduction on petrol, Rs10 paisa per litre on HSD, 71 paisa per litre on kerosene and 96 paisa per unit on LDO. The sources said the petroleum ministry did point out the mistake to the finance ministry and requested correction but the finance ministry’s officials expressed inability to go back to the prime minister because of fear of facing embarrassment.