Things have lately been falling well in place for the government be it remittances, current account, rupee dollar parity or oil prices. The mid-month petroleum product pricing revision enabled the government to further reduce the prices on both petrol and diesel, as sharply improved currency kept the base price lower from previous listing.

Such is the comfort and cushion that the government has slashed the prices with ease without having to think twice. That is because the Petroleum Levy already sits at the maximum allowed limit of Rs30/ltr for both petrol and diesel. The PL collection on HSD and petrol combined has averaged a staggering Rs43 billion per month in FY21 to date.

Considering the consumption of petrol and HSD combined has increased by 10 percent year-on-year in Jul-Oct 2020, and assuming November sales follow the pattern so far seen in FY21, little over half of annual PL collection target at Rs450 billion for FY21 could be fetched in just first five months of the fiscal year. This was almost unthinkable, back when the budget was announced, as the previous highest PL collection stood at Rs293 billion.

Nobody knows how the oil prices pan out in the next seven months of the fiscal year, but it can be said with some degree of certainty that there is no going back to $60/bbl and beyond, given the circumstances. With the second wave of the pandemic in full swing, bigger Western economies are all set to post worse growth and demand numbers than earlier projected. Even all Opec efforts would not be enough to balance a market that is gasping for breath.

Even in the least optimistic scenario, of the government having to maintain the prices at current levels in case of an oil price increase by 10 percent from current levels, the PL will have to be lowered by Rs5/ltr. Plot Rs25/ltr for the second half of FY21, at the current demand growth of 10 percent, and there is another Rs233 billion to be had. Read this with a likely figure in excess of Rs280 billion for 1H21 – and you have a PL collection breaching the already once-optimistic target by 14 percent. This sure is one lesser worry for the remainder of the year in Islamabad.