AGL 6.80 Decreased By ▼ -0.03 (-0.44%)
ANL 9.44 Increased By ▲ 0.07 (0.75%)
AVN 78.11 Increased By ▲ 0.36 (0.46%)
BOP 5.46 Increased By ▲ 0.04 (0.74%)
CNERGY 4.96 No Change ▼ 0.00 (0%)
EFERT 78.49 Increased By ▲ 0.59 (0.76%)
EPCL 55.75 Decreased By ▼ -0.01 (-0.02%)
FCCL 15.47 Increased By ▲ 0.17 (1.11%)
FFL 6.40 Increased By ▲ 0.03 (0.47%)
FLYNG 8.17 Decreased By ▼ -0.02 (-0.24%)
GGGL 10.15 Decreased By ▼ -0.17 (-1.65%)
GGL 16.28 Decreased By ▼ -0.37 (-2.22%)
GTECH 8.89 Decreased By ▼ -0.30 (-3.26%)
HUMNL 6.45 Increased By ▲ 0.09 (1.42%)
KEL 2.99 Increased By ▲ 0.05 (1.7%)
LOTCHEM 29.09 Increased By ▲ 0.19 (0.66%)
MLCF 28.06 Increased By ▲ 0.26 (0.94%)
OGDC 74.69 Increased By ▲ 0.09 (0.12%)
PAEL 16.15 Increased By ▲ 0.14 (0.87%)
PIBTL 5.48 Decreased By ▼ -0.06 (-1.08%)
PRL 17.05 Increased By ▲ 0.13 (0.77%)
SILK 1.23 Increased By ▲ 0.12 (10.81%)
TELE 11.46 Increased By ▲ 0.49 (4.47%)
TPL 8.08 Increased By ▲ 0.07 (0.87%)
TPLP 21.15 Increased By ▲ 0.20 (0.95%)
TREET 23.00 Decreased By ▼ -0.25 (-1.08%)
TRG 140.40 Increased By ▲ 5.80 (4.31%)
UNITY 23.45 Decreased By ▼ -0.04 (-0.17%)
WAVES 11.46 Decreased By ▼ -0.04 (-0.35%)
WTL 1.71 Increased By ▲ 0.04 (2.4%)
BR100 4,169 Increased By 19.4 (0.47%)
BR30 16,058 Increased By 228.3 (1.44%)
KSE100 41,517 Increased By 166.2 (0.4%)
KSE30 15,573 Increased By 95.7 (0.62%)
Follow us

The news channels continued the tried and tested “petrol bomb” headlines, when in fact 1.8 percent increase in petrol price was not the real news. The news is that the 15-month high petrol price at Rs112.7/ltr has the lowest incidence of Petroleum Levy ever in Pakistan’s history. It is so low that it is non-existent. Literally. As anticipated earlier, the PL on petrol has now been brought down to nil for the first fortnight of the new fiscal year.

It was seen coming. As international oil prices started to rise, the government’s space eroded. From the high of Rs30/ltr in November 2020, the PL has come down to zero for July 2021. While PL at zero may sound the biggest news, it is not. It is the GST on petrol, which has been tinkered with for the first time in two years.

Recall that the GST on both petrol and diesel had stayed at standard 17 percent since July 2019 under the IMF program, and all adjustments in tax incidence were carried through PL. Not anymore. PL offers no more room. It is time for GST. It is not the magnitude that is important, as it has only dropped to 16.4 percent. But this indicates the government’s willingness to let go of revenue in a bit to keep petroleum prices in check, even if it now takes reducing GST.

The base price for petrol at Rs86 per liter for July’s first 15 days is the highest ever. No wonder it coincided with the lowest ever PL. The benchmark Arab light crude oil at $79/bbl is the highest since November 2018. The tax incidence is also the lowest since November 2018 – this is no coincidence. What is clear is that if oil prices remain north of $70/bbl, government will struggle to levy PL higher than Rs5/ltr.

The government has clearly banked on low oil prices. The chances of that happening anytime soon appear slim, but oil market has thrown many surprises over the years. Whether or not Saudi Arabia also offers oil at concessional rates in addition to deferred payment facility is not known yet. The finance minister had previously hinted at this, without confirming. If history is any guide, the low petrol price – high growth theory is being put to test. Fiscal consequences are obvious, but it is worth the shot.

Comments

Comments are closed.