PL: Hike may not be levied in one go
- Ministry of Finance officials say concern at this time was creating sufficient fiscal space that would satisfy the IMF
ISLAMABAD: The increase by Rs 10 per litre to Rs 60 per litre as the maximum allowed under petroleum levy (PL) as stipulated in the Finance Bill 2023 may not be imposed in one go from July 1, 2023, as consumers are already burdened by taxes of up to Rs 67.50 per litre, sources in the Petroleum Division told Business Recorder.
The Ministry of Finance officials told Business Recorder that their concern at this time was creating sufficient fiscal space that would satisfy the International Monetary Fund (IMF) into reaching a staff level agreement on the pending ninth review.
The next few days would tell whether the Petroleum Division’s view would gain ascendance over the Finance Ministry’s needs, sources stated, though the consensus was the latter’s decision would prevail.
The ambitious budgeted target under PL has been set at Rs 869 billion for next fiscal year. During the outgoing fiscal year 2022-2023, the government budgeted to collect Rs855 billion through PL, however, this target was revised downward to Rs 542 billion.
Three main reasons are cited for the shortfall in meeting the budgeted target for the outgoing year were: (i) a dramatic decline in consumption, down 23 percent in the first 10 months of the outgoing year to an average of 1.37 billion litres per month for petrol and HSD, due mainly to very high inflation rates and the shrinking value of each rupee earned; (ii) dithering over raising the PL to its maximum, Rs 50 maximum allowed at the time, for political reasons –the maximum on petrol was levied in November and on HSD in April 2023; and (iii) a rise in the international price of oil and products together with an eroding rupee dollar parity.
Saudi Arabia has already announced its decision to cut production by one million barrels per day (bpd) with effect from 1 July 2023, which has sent a signal to the market that oil and products prices will rise further. This would make any decision to up the PL to the new maximum of Rs 60 per litre even more politically challenging
A raise in PL directly impacts on transport prices including transport of perishables from farm to market which would further raise food inflation from the existing high of 50 percent pushing ever more people under the poverty line.
Copyright Business Recorder, 2023
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