The half year fiscal numbers are out, and the Petroleum Levy (PL) tops the table with the highest year-on-year growth. The Petroleum Levy collection more than doubled in 1HFY21 to Rs275 billion with 2QFY21 registering the highest ever quarterly number of Rs139 billion.
The total tax incidence on two key petroleum products, petrol, and HSD, at Rs45/ltr for 1HFY21 is comfortably the highest ever half-yearly toll. The previous highest recorded in the preceding six months was at Rs33/ltr, which includes both GST and PL. Enough has been said and written on how the low international oil prices presented the government with an opportunity to maximize the PL incidence to the allowable limit of Rs30/ltr.
The last part of 2QFY21 saw the government giving in on the PL, as oil prices rose, but the quarterly PL collection stayed higher than previous quarter – mainly at the back of 11 percent higher sales volume. The rather ambitious PL target of Rs450 billion for FY21 could still be a daunting task especially now that oil prices are on the rise, but in all likelihood, it would not be a big miss.
More than 60 percent of the full year PL target has been achieved in 1HFY21. If the government is unable to charge more than Rs20/ltr as PL for the rest of the year (current Rs21/ltr), it would still fetch Rs180 billion for 2HFY21, given that the volume stays the same as 1HFY21. A 10 percent drop in volume would keep the government Rs15 billion shy of the annual target, which is not at all bad, considering the rather steep nature of the target. Higher volumes have also jacked up petroleum GST revenues, which are 5 percent higher year-on-year for 1HFY21.
The trend suggests it would get increasingly difficult for the government to impose higher PL for the rest of the year, especially if the government intends to keep petroleum prices lower on year-on-year basis. January 2021 recorded the lowest PL collection in nine months, and more of the same could well be the flavor of the second half.
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