ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has deferred decision on rate of Petroleum Levy (PL) on Liquefied Petroleum Gas (LPG) and directed Petroleum Division to consult Law Division.
Sharing the details, sources said, Finance Division conveyed directions for collection of non-tax revenue of Rs.2 billion as Petroleum Levy on LPG under Finance Bill for Fiscal Year 2017-18. However, Finance Division did not give directions for applicable unit rate of PL (e.g. Rs. per Metric Ton).
To achieve the given revenue target of Rs.2 billion and in the absence of any directions from the Finance Division, a rate of Rs.4,669 per Metric Ton (MT) was computed keeping in view the forecast production of LPG during the period - November 2017 till June 2018 - based on the quantity of locally produced LPG during previous year (FY 2016-17), assuming that Finance Bill would be approved by the Cabinet before approval of the Parliament and fresh approval of the Cabinet would not be required again for fixing the rate of PL and its collection. Therefore, after approval from Minister for Petroleum, without getting fresh approval from the Cabinet or vetting of notification from Law and Justice Division, PL rate of Rs.4,669/MT was notified by the Petroleum Division on November 2, 2017 to be applicable from November 1, 2017 under sub-section 1 of Section 3 read with Fifth Schedule of the Petroleum Products (Petroleum Levy) Ordinance, 1961. The notified PL rate of Rs.4,669/MT on locally produced LPG was within the limit of Rs.11,486/MT under the said Ordinance, 1961. For PL rate of Rs.4,669/MT, the revenue target was successfully achieved (collected Rs.2.122 billion) for the FY 2017-18.
Petroleum Division further informed that for FY (2018-19), Finance Division conveyed an amount of Rs.2 billion as a revenue target for PL. To achieve this target, PL rate of Rs.2,500/MT was worked out, keeping in view the estimated quantity of LPG production during FY 2018-19. Subsequently, on August 7, 2018, a draft notification proposing PL rate of Rs.2,500/MT was submitted to Law and Justice Division for their vetting. On 9th August 2018, Law and Justice Division intimated that their perusal of the record did not slow approval of the Federal Government to fix a rate for recovery of the proposed PL whereas the Supreme Court in its judgment reported as PLD 2016 SC 808 has held that the Federal Government means the entire Cabinet consisting of the Prime Minister and the Federal Ministers. Law and Justice Division, therefore, returned the draft notification for reconsideration and to obtain approval of the Federal Cabinet in respect of the rate of the recovery of the Petroleum Levy. Accordingly, on 24th October; 2018, a Summary was circulated for seeking comments of relevant Ministries, containing following proposals: (i) approval of Rs.2,500/MT in respect of Petroleum Levy on locally produced LPG to meet the revenue target of Rs.2 billion ; and (ii) authorize Petroleum Division to compute/adjust Petroleum Levy on LPG in future in case it is required to meet the targets set by the Parliament.
In response Law and Justice Division while supporting the proposals , added that delegation of power by the Cabinet to the Petroleum Division to adjust price of PL on LPG in future is in line with Section-8 of the Ordinance 1961. Finance Division (Budget Wing) was of the view that the Government is facing severe financial crisis and at this stage any reduction in rates of Petroleum Levy would intensify the crisis and would add to the deficit. Therefore, in line with the views of Finance Division, PL rate of Rs.4,669/MT (applicable since 1st November 2017) was applied for the FY 2018-19 and as. a result 43.7 billion was collected against the given revenue target of Rs.2 billion during FY 2018-19.For FY 2019-20, the Finance Division enhanced the revenue target from Rs.2 billion (in FY 2018-19) to Rs.4 billion. For PL rate of Rs.4,669/MT, during the period July 2019 to May 2020, an amount of Rs.2.958 billion has been collected. For the period between November 2017 to June 2020, a total amount of nearly Rs.9.066 billion has been collected against given target of Rs.8 billion during FY 2017-18, 2018-19 and 2019-20. Recently, Finance Division has reportedly set out a target Rs.5.516 billion PL on LPG in Budget 2020-21, for which a PL rate has been computed as Rs.8,571/Mt based on estimated local LPG production during FY 2020-21 excluding LPG production by JJVL.
It was pointed out that Writ Petitions challenging the notification of Petroleum Division November 2, 2017 are also pending in different courts of law on various grounds including non-approval of the Federal Government for rate of PL in vogue.
The meeting was apprised that Section-8 "Delegation of Powers" of Petroleum Products Ordinance, 1961 provides that the Federal Government may, by notification in the official Gazette, direct that all or any of its powers under this Ordinance or the Rules made there under shall, in such circumstances and under such conditions, if any, as may be specified in the direction, be exercised also by an officer or authority subordinate to the Federal Government.
OGRA has adopted LPG (Production and Distribution) Rules, 2001 and has been regulating LPG sector including issuance of license(s) for LPG production and distribution. Since inception of OGRA, Petroleum Division has not been a regulatory body and its role is limited to policy making with no legal enforcement powers in LPG sector. As a regulator, OGRA possesses needed enforcement powers for collection of Petroleum Levy. In addition, compared to Petroleum Division, OGRA would be in a better position to calculate and impose PL rate within the least possible time, which otherwise the Petroleum Division is not in a position due to involved procedural requirements (e.g. circulation of Summary and approval from the Cabinet etc.). Therefore, under Section-8 of Petroleum Products (Petroleum Levy) Ordinance 1961, it will be logical to authorize OGRA by transferring the authority for future fixation of PL rate in consultation with Finance Division, effective collection of PL on legally produced LPG and dealing with ancillary issues by adopting Petroleum Products (Development Surcharge) Rules, 1967 made under the said Ordinance, 1961.
Recently, Finance Division has proposed Rs.5.516 billion of PL on LPG in Budget 2020-21 for which a PL rate will also be required to be ascertained and notified by OGRA. Therefore, in accordance with the opinion of Law and Justice Division and Finance Division and to overcome any legal complications, the followings proposals were submitted for consideration of the ECC: (i) ex-post facto approval of rate of Petroleum Levy on locally produced LPG as Rs.4,669 per Metric Ton effective from November 1, 2017; (ii) authorize OGRA under Section-8 of Petroleum Products (Petroleum Levy) Ordinance, 1961, as per draft notification (Appendix-A), by transferring the authority from 01.07.2020 onwards for future fixation of PL rate in consultation with Finance Division, effective collection of PL on locally produced LPG and dealing with ancillary issues by adopting Petroleum Products (Development Surcharge) Rules 1967 made under the said Ordinance, 1961 and ;(iii) in case approval of proposal at 9(b) above is not granted, approval of PL rate of Rs.8,571 per metric ton may be granted with effect from the decision of the Cabinet for notification & collection of PL on LPG by the Petroleum Division.
Law and Justice Division was of the view that Federal Cabinet cannot grant ex-post facto approval for imposition of Petroleum Levy (PL) retrospectively. Therefore, legalisation would be required for the purpose. The ECC, therefore, directed the Petroleum Division to sort the issue in consultation with Law and Justice Division and submit a report thereof for consideration of the ECC. Regarding proposal at Para 9 (b) of the Summary, OGRA did not support the same with remarks that fixing of PL rate should continue to be done by the Petroleum Division under Petroleum Products (Petroleum Ordinance 1961 and Petroleum Products (Development Surcharge) Rules 1967. The ECC deferred its decisions and directed Petroleum Division to present a viable solution after consulting Law and Justice Division on the proposal of Para 9(a) of the Summary. The ECC deferred decision on some of the proposals and directed Petroleum Division to submit recommendations in consultation with concerned stakeholders.
Copyright Business Recorder, 2020
Comments
Comments are closed.