Petrol prices went unchanged for the second half of September 2020. No change makes little news. The government may claim it decided to “absorb” the impact in keeping the price unchanged, against the regulator’s advise of another increase in retail gasoline prices.
Only that, the Petroleum Levy with effect from September 16 till the end of the month went up to Rs28/ltr, or 30 percent from the previous PL for the first 15 days. In short, an alternate way to look at the unchanged petroleum prices is to call it a “tax bomb”, if petrol bomb sounds too redundant by now, or in this case, slightly out of place.
There was criticism earlier this month when the government went against Ogra’s recommendation of price increase, and instead decided to continue with the prevailing rates, lowering the Petroleum Levy from previous month. Fifteen days on, the move has started to make sense. Voices in support of fortnight price change have been raised for a very long time, citing this very reason, to minimize the impact of a very high pass-on, and to maximize the tax opportunity when prices are low, swiftly moving in a narrower 15 day band.
Had the previous monthly regime been in place, the PL collection on account of petrol and HSD would have been cumulatively lower by Rs5-6 billion. That is because the global oil prices were caught in a bear rally right after the cut-off date of the September 01 price call.
It may be argued that the government could have passed on the impact of Rs6-7/ltr, instead of increasing the PL. But any non-increase in prices usually does not attract unwanted and uneducated criticism, and at the same time, price stability is also maintained, while pouncing on the opportunity.
Surely, there will be times, when the government may want to use the opportunity to pass on the impact, in case of unfavorable price movement, as the number of opportunities to potentially make up for the loss have doubled. The recent oil price bear rally is a good sign for Pakistan, and if it sticks around the current rate, the maximum PL limit could well be achieved yet another time, without moving the prices north.