ISLAMABAD, Sept 1: The government is considering different options to offset the revenue impact of the freeze on domestic petroleum prices if the international prices remain high beyond the current month, sources said on Wednesday.
A petroleum ministry official told Dawn that one option could be to adjust prices in such a manner that the common consumers, cost of production or industrial growth was not adversely affected but the government's revenue remained manageable.
He said options were being considered to manage the impact of the decline in the petroleum development levy (PDL) and achieve the budgeted target of collection of Rs47.5 billion under the head during 2004-05.
The government had put a moratorium on petroleum prices in May at $33-34 per barrel by reducing the levy's rate, which dropped to zero during the last fortnight. It could maintain the moratorium even if the international prices dropped below $32 per barrel till it recovered the losses suffered during the first quarter of the fiscal year, sources said.
They said reduction in the levy would not cause any major loss to the government because the international prices had started to decline and were expected to stabilize at $31-32 per barrel within the current month.
They said the government had lost around Rs5 billion in PDL collection during the first two months of the current fiscal year. The estimated quarterly target of the collection is around Rs11.8 billion.
Sources said the petroleum industry had absorbed an impact of about Rs900 million of the freeze on prices and told the government it could not bear the burden any more. The target for PDL collection during the year is Rs47.5 billion.
Last year, the government set a target of Rs46 billion but the collection amounted to Rs46.5 billion. Sources said the prices of the Arab-Gulf crude oil, the base for Pakistan's domestic petroleum prices, had dropped from a peak of $42 per barrel to $37 and were expected to come down to $30-32.
Nobody expected the international prices to stay at such a high level any more, they said. The New York price of crude oil had dropped to $41 per barrel from its highest level of $49.
The Brent crude oil price had reduced from $47 per barrel to $40, an official said. Dr Ashfaque Hassan Khan, economic adviser and the debt management committee director-general, said the current unnaturally high oil price was a one-time phenomenon and was not because of any economic fundamental. "The loss of revenue in one quarter of the year is nothing," he said.
He said the situation in Iraq was improving and the country had started exporting about 300,000 tons of oil, that would stabilize the market. He said it was a considered decision of the government not to pass on the direct impact of high oil prices because of its multi-dimensional impact, including inflationary trend, rise in interest rates, pressure on common man, increase in cost of production, adverse effect on industrial growth and, above all, the country's overall growth rate.
He said the government could offset the loss of PDL collection in one quarter through better tax collection. He said the Central Board of Revenue collected Rs519 billion last year against the target of Rs510 billion.