ISLAMABAD: On Tuesday, the government raised the prices of all petroleum products by 3 to 8 pc for the next 16 days, with immediate effect.
According to the Ministry of Finance’s announcement, ex-depot high-speed diesel (HSD) and petroleum prices have been increased by Rs3 per litre, while petroleum and light diesel oil (LDO) prices have been increased by Rs5 per litre.
The government therefore faced a big tax hit and cut the petroleum levy on petrol by about Rs4.50 per litre and on HSD by about Rs2.51 per litre. In the other hand, the fuel levy for kerosene decreased by approximately 55 paisa per unit and the LDO increased by approximately 65 paisa per litre.
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As such, the HSD ex-depot price was set at Rs108.44 per litre instead of the current Rs105.43 per litre average, indicating an improvement of Rs33 per litre (2.84pc). In heavy transport equipment, trains and farm engines such as trucks, coaches, tractors, tube-wells and threshers, etc the HSD is used mainly. This is one of inflation’s main contributors.
In addition, the ex-depot petrol price was fixed at Rs103.69 per litre instead of Rs100.69, suggesting an improvement of Rs3 per litre or 2.97pc. For private transport, small buses, rickshaws and two-wheelers, petrol is often used.
Instead of the current cost of Rs65.29, the ex-depot price of kerosene was raised by Rs5 per litre (7.65pc) to Rs70.29 per litre. In most cases, kerosene oil is used by unscrupulous elements for gas blending and to some degree, for illumination in very remote areas.
Likewise, from its current rate of Rs62.86, the ex-depot rate of LDO was also raised by 7.95pc or Rs5 per litre to Rs67.86 per litre. Flour mills and a handful of power plants consume LDO.
In revising the prices of petroleum goods, in an obvious effort not to impact the nascent decreasing trend in the rate of inflation, the government did not pass on the full effect of the rise in foreign prices.
It reduced the petroleum levy on petrol by about Rs4.50 per litre from Rs28.68 at present to about Rs24.15 per litre and reduced the levy on HSD by about Rs2.50 per litre to Rs25.08 per litre from Rs27.57. Petrol prices would have been higher if the government had kept the tax rates unchanged.
Similarly, from Rs6.10., the petroleum tax on kerosene was lowered to Rs5.55 per litre. In the other hand, it raises the tax on LDO from zero to round off the rise by 65 paisa per litre.
To raise extra taxes, the government is currently charging a regular rate of 17pc general sales tax (GST) across the board, although the oil levy is marginally lower than the legal allowable cap. The government was charging 0.5pc GST on LDO, 2pc on kerosene, 8pc on petrol and 13pc on HSD until January of last year.
As such a total of about Rs42 per litre tax on petrol and about Rs59 per litre tax on HSD are now being paid by the government.
The government has raised petroleum levy rates instead of GST over the last few months since the levy remains in the federal kitty while GST goes to the divisible pool taxes and the provinces are now taking around 57 percent share.
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Due to their massive yet growing consumption in the country, petrol and HSD are two major products that generate most of the government’s revenue. Compared to the monthly consumption of around 600,000 tonnes of HSD, average petrol sales reach 700,000 tonnes per month. Generally, prices of kerosene oil and LDO are less than 11,000 and 2,000 tonnes a month, respectively.
Under the revised system, the government is revising oil prices on a quarterly basis in order to pass on the foreign prices reported in Platt’s Oilgram instead of the previous monthly estimation mechanism on the basis of the existing import costs of Pakistan State Oil.