The government in its bid to achieve revenue targets assigned by the International Monetary Fund (IMF) may increase the petroleum development levy (PDL) charge to Rs60 per litre for High-Speed Diesel (HSD) in order to meet its target of Rs869 billion.

The projection was made by JS Global, a brokerage house, in a report on Friday.

“Declining POL sales remains a concern in relation to meeting the PDL collection targets established in coordination with the IMF,” said the brokerage house.

POL sales in Pakistan clocked in at 1.06 million tons, down significantly by 31% YoY and 25% MoM in September 2023, the lowest level since the COVID lockdown in March 2020.

This decline was primarily attributed to record-high prices, smuggled oil from Iran, and lower FO-based power generation, experts said. Ex-Furnace Oil (FO) sales clocked in at 0.97 million tons in September 23, down 20% YoY and 24% MoM.

During the first quarter of FY24, oil sales clocked in at 3.8 million tones fall 15% YoY. EX-FO, oil sales fell 1% YoY to 3.5 million tons.

JS Global, in its report, shared that a 20% YoY decline in sales volumes will result in a shortfall of approximately Rs81 billion in achieving the FY24 PDL collection target of Rs869 billion.

“This potential inability to meet the FY24 PDL target can be attributed to the reduced OMC sales and the government’s reluctance to raise PDL charges on HSD,” said the brokerage house.

The government in bid to increase revenue collection imposed PDL on Motor Spirit (MS) and HSD in the previous fiscal year.

PDL charges reached Rs50 per liter for both MS (in November 2022) and HSD (by April 2023), which helped improve PDL collection despite low sales volumes throughout the last year. Subsequently, the PDL on MS was further raised to Rs55 per liter in July and reached Rs60 per liter by September 2023.

“We believe there is a possibility that the government may consider increasing the PDL charge to Rs60/liter for HSD as well in the near future in order to reach the ambitious target of Rs869 billion.

“Additionally, pressures on tax collection might lead to the imposition of GST charges on these products, which are currently at a zero rate, however, higher retail prices may further have an unfavourable impact on POL product volumes,” JS Global concluded.