POL prices: Ogra expecting 12 percent increase in February

Oil and Gas Regulatory Authority (Ogra) is expecting 12 percent increase in prices of petroleum products during month of February 2011 due to hike in global oil prices. If the government fails to adjust the expected hike in domestic oil prices by 12 percent to align them with the rise in global prices for the month of February, revenue from Petroleum Levy (PL) may decline to zero, sources in the Oil and Gas Regulatory Authority (Ogra) told Business Recorder.
In December 2010, as global oil prices rose, the government kept oil prices unchanged by adjusting PL downward, resulting in a revenue loss of Rs 2 billion. The reason: an intelligence report warning of widespread street protests in case the price was raised.
In January, the oil prices were raised but, after a week, he government withdrew its decision due to intense political pressure. This resulted in a revenue loss of Rs 5 billion--on account of PL collection. In total, the revenue loss for December-January has been Rs 7 billion--on account of PL. "The average rise in oil price stands at 8 to 9 percent from January 1 to 22, 2011, expected to exceed 12 percent by end of the month," sources said, adding that average increase in diesel price is over Rs 4 per litre and Rs 4.5 per litre petrol price.
"If the government brings rate of PL to the level fixed in budget, then rise in diesel price will be over Rs 8 per litre and of petrol over Rs 9 per litre," sources added. Average price of crude oil in the international market reached $95 per barrel on Saturday, which is calculated to have an impact of 12 percent on domestic oil prices.
The government collected Rs 107 billion revenue on account of PL and general sales tax (GST) on petroleum products during first half (July-December) of financial year 2010-11. According to break-up, the government collected Rs 47 billion PL and Rs 60 billion GST on petroleum products.The annual budgetary target for collection under this head is Rs 250 billion, and includes PL and general sales tax in the domestic market and at import stage.
The government fixed the rate of PL in budget as follows: petrol Rs 10 per litre, HOBC Rs 14 per litre and kerosene oil Rs 6 per litre that has been reduced to Rs 4.27 per litre, Rs 7.43 per litre and Rs 2.55 per litre respectively after withdrawal of oil price hike. The government was charging Rs 3 per litre PL on light diesel oil (LDO) that has been abolished and is currently charging Rs 10.60 per litre GST on petrol, Rs 12.59 per litre on HOBC, Rs 10.31 per litre on kerosene oil and Rs 9.68 per litre GST on LDO.