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Govt may withdraw part of oil rates hike

ISLAMABAD: The government is considering to revoke in a couple of days a part of the 9.2 per cent increase in prices of petroleum products announced three days ago in view of the pressure it is facing from coalition partners and the opposition.

PSO Pakistan Business NewsA senior government official told Dawn that the ministries of finance and petroleum and natural resources were engaged in meetings on Monday before and after the National Assembly session which witnessed rowdy scenes over the price increase, disrupting parliamentary proceedings.

The official said the economic managers were strongly opposed to reducing prices because of international commitments and the resultant revenue loss. “The one who suspends this increase will have to give an alternative,” he said, adding that the government would lose Rs4.5 to 5 billion a month if petroleum prices were reduced.

But given the instructions from the political leadership, they worked out different options for price reduction to cool down political temperatures.

He said the government would lose Rs850 million if the general sales tax was brought down to last month’s level. The move will reduce prices between 50 paisa to Re1 per litre on different products and the exchequer would lose about Rs4.3 billion. In that case, the prices would drop between Rs4 and Rs7 per litre on various products. If the entire increase was withdrawn, the revenue loss would be of around Rs5 billion, the official said, adding that it was up to the government to decide on the size of revenue loss. “The government can also opt for a middle route of reducing a part of petroleum levy,” he said.

Currently, the government charges petroleum levy of Rs10 per litre on petrol, Rs14 on HOBC, Rs6 on kerosene, Rs8 on high speed diesel and Rs3 on light diesel oil. The GST rate ranges between Rs11 and Rs14 per litre at 17 per cent which fluctuates in absolute terms with international prices.

A petroleum ministry official, however, said there was a cushion in oil prices to be passed on to consumers. He said the government had set an annual target of Rs250 billion revenue on oil prices, including the petroleum levy and general sales tax, in the domestic market and at import stage.

The government collected about Rs155-160 billion during the first six months of 2010-11. If collected at a lower rate in the next six months, it could get about Rs100 billion and meet the annual target.

He said the government had collected Rs55 billion as petroleum levy, Rs60 billion as GST on domestic sales and Rs44 billion as GST at import stage. If the pricing mechanism remained unchanged, the total revenue on this account could cross Rs310 billion, he said.

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