ISLAMABAD: Higher taxation on LPG, once termed ‘poor man’s fuel’ is likely to suppress its demand in the country that may result in an ecological disaster as more and more people resort to using wood as a fuel.
In this regard, the Federal Board of Revenue (FBR) has received a representation of the LPG industry on the impact of the higher taxation on consumers.
Currently, the LPG policy by the government of Pakistan has linked the price of LPG with the contract price of Saudi Aramco and on top of it charging 17 per cent general sales tax (GST) and Rs4,669 per ton petroleum development levy (PDL), which has made this product inaccessible for the poor citizens of Pakistan, according to the industry.
With the skyrocketing inflation clocking at 21.3 per cent for the month of June, the poor are literally being crushed. The PDL on LPG generates only around 6.5 billion rupees of revenue for the Government of Pakistan.
The industry’s representation claims that on about 1.4 million tons of LPG consumption, the PDL recovered is just Rs6.5 billion. This amount can be easily adjusted in 21 billion liters of petroleum products consumed annually all over Pakistan. These products higher consumption is within relatively better placed economic classes. This shift can create fiscal space that would allow cheaper cooking fuel for the marginalized and poorly services areas.
PG which is considered an environment-friendly fuel for the areas where piped gas is too expensive to deliver has less than one per cent contribution in the energy mix. The fuel needs to be actively encouraged but is being neglected by the policymakers to promote this fuel as an alternate to petrol and natural gas by withdrawing the GST and PDL to make this fuel affordable for the poor masses, the industry said.
Countries such as India and Bangladesh are promoting the use of LPG by giving subsidy to the end users, whereas, in Pakistan, the government is not only allowing to charges the highest benchmark price of CP Saudi Aramco but adding on GST and PDL to make it most expensive fuel for pool masses.
In developing countries, especially, in rural areas, 2.5 billion people rely on biomass, such as fuel wood, charcoal, agricultural waste and animal dung, to meet their energy needs for cooking. In many countries, these resources account for over 90 per cent of household energy consumption.
Burning wood fuels within the household create indoor pollution as firewood and charcoal both produce smoke on burning. The extent of this problem depends on the species of wood and quality of charcoal, both of which are becoming poorer. Effects on the users include respiratory and eye problems. About 1.3 million people mostly women and children die prematurely every year because of exposure to indoor air pollution from biomass.
A cursory survey of the rural areas witnessed that people are forced to collect the wood from available trees and use them for cooking as well as for heating in winter, which is quite alarming.
There is evidence that, in areas where local prices have adjusted to recent high international energy prices, the shift to cleaner, more efficient use of energy for cooking has actually slowed and even reversed.
The LPG used as a proxy for modern fuels, effective policies will need to be designed, since there are substantial differences between and even within countries. Regulatory reforms can improve the affordability, and availability of cheap fuel, the industry’s presentation added.
Copyright Business Recorder, 2022
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