Petroleum prices: one-week reprieve to cost exchequer Rs 13 billion

The government will suffer approximately Rs 13 billion revenue loss on account of sales tax and petroleum levy for maintaining the petroleum price at existing level for one week. Sources said that monthly sales tax collection from petroleum products is around Rs 35-40 billion depending on the increase in petroleum prices. Maintaining prices at existing level will have a negative revenue impact on sales tax collections of approximately Rs 10 billion. The one week revenue impact of petroleum levy is around Rs 3 billion, sources added.
Pakistan Muslim League-N government on Thursday had decided to keep the prices of petroleum products unchanged for a week and passed the buck onto the incoming caretaker government.
The caretaker government will take the delayed but crucial decision to increase petroleum prices which will help the new government to the extent that it will not be blamed for the hike which will push up transport fares and price of most essential goods in the country.
Oil prices are revised on the last day of every month. Petrol and HSD are two major products that generate the bulk of revenue for the government because of their massive and growing consumption.
Oil and Gas Regulatory Authority (Ogra) recommended a hike in domestic petroleum prices in line with the rise in their international price with oil hitting $80 per barrel. Ogra recommended prices, if approved by the government, would immediately impact on transport fares and price of food items, a politically unpopular decision.
In March, 2008, the then caretaker government was forced to announce an increase in the price of petroleum products twice in one month, drawing immediate criticism from opposition parties as well as the general public.
Based on existing tax rates and import prices reported by Pakistan State Oil (PSO), Ogra has worked out an increase of Rs 12.50 per litre in the price of High Speed Diesel (HSD), Rs 8.35 per litre in motor gasoline (petrol), Rs 8.23 per litre increase in kerosene and Rs 11.65 per litre increase in the price of LDO.
Deputy Chairman Senate Saleem Mandviwalla told Business Recorder that the caretaker government has a mandate to run day to day business. He said that the caretaker set up can take any decision regarding petroleum prices in the country.
Economist Dr Salman Shah told Business Recorder that the caretaker will increase the price to match international prices and to facilitate the new government. He said the caretaker government would like to reduce the burden on the new government because it could be difficult for it to take such a hard decision in the beginning.
He said that any new government at the centre would demand that the caretakers should revise the petroleum prices before the formation of the new set-up so that the new government would not be blamed for the overall price hike caused by increasing oil prices.